Sands China Falls as Macau Downturn Causes Forecasts Miss

Sands China Ltd. fell to a month low in Hong Kong after the Macau casino operator reported earnings that were worse-than-expected and billionaire chairman Sheldon Adelson said he’s uncertain about the industry’s recovery.

The stock ended down 2.5 percent at HK$31.80 by the close of trading, the lowest level since March 19. The other five casino companies in the city also fell, with Wynn Macau Ltd. down 2.3 percent and MGM China Holdings Ltd. losing 2.9 percent. The benchmark Hang Seng Index fell 0.4 percent.

Adjusted property earnings before interest, taxes, depreciation and amortization dropped 43 percent to $531 million at the Hong Kong-listed unit of Las Vegas Sands Corp. That missed the $562.5 million median of six analysts’ estimates in a Bloomberg survey.

China’s crackdown on corruption has caused a 10-month long slump for Macau’s casino industry since June, as high-rollers avoided the city, the world’s biggest gambling hub. The economic slowdown in China, a smoking ban in casinos and stricter visa rules also damped business from mass-market gamblers.

The decline in Sands China’s margins in Macau was “particularly disappointing” with weakness seen in both high and low end of the mass-market segment, Deutsche Bank AG analyst Karen Tang wrote in a note today. She expects the market to cut margins and earnings forecasts for the company and all other operators in the city.

Tang has a “sell” rating on Sands China with a target price of HK$26.

‘Uncharted Territory’

Property EBITDA margin at the Venetian Macao fell to 34.3 percent from 39.7 percent, while that at Sands Cotai Central fell 4.7 percentage points to 27.3 percent.

Macau’s casinos “are sailing in uncharted territory” making accurate predictions difficult, Adelson said in a conference call Thursday.

Separately, SJM Holdings Ltd. Chief Executive Officer Ambrose So has said whether Macau casino revenues can stage a rebound in the second half of this year remains to be seen, the Hong Kong Economic Journal reported on its website today.

Sands China’s net income slumped 54 percent to $344.7 million year on year with revenue down 35 percent to $1.77 billion, based on U.S. generally accepted accounting principles.

Opening Date

Sands China is building the $2.7 billion Parisian Macao, its fifth casino amid a slew of new offerings including from Galaxy Entertainment Group Ltd. and Melco Crown Entertainment Ltd. as Macau cut its forecast for average monthly gambling revenue in March.

The city’s Chief Executive Fernando Chui has pledged a five-year plan to make it less dependent on casinos.

An opening date for the Parisian could move between late summer of 2016 to the Thanksgiving period in November 2016, depending on the Macau government’s decision on labor allocation, Sands President Rob Goldstein said.

Galaxy on April 16 said first-quarter profit plunged 40 percent, the first among Macau’s six listed casino operators to announce earnings as it prepares to open two new casinos next month.

— With assistance by Daryl Loo

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