Las Vegas Sands Hitting on All Cylinders in Asia

Gaming trends in Macau are moving in Las Vegas Sands' (NYSE: LVS  ) direction, and third-quarter results are proof. As Cotai builds out a critical mass of resorts and casinos, the properties owned by Las Vegas Sands and Melco Crown (NASDAQ: MPEL  ) will continue to outperform Wynn Resorts (NASDAQ: WYNN  ) , MGM Resorts, and even the aging Sands Macau, which started the flood of U.S. companies to Macau.  

The numbers
Overall, Las Vegas Sands' revenue increased 31.7% from a year ago last quarter to $3.57 billion, and adjusted EBITDA rose 45.5% to $1.28 billion. Growth was driven by a 148.9% jump in revenue at Sands Cotai Central and 23.8% revenue growth at Marina Bay Sands, partly because of better luck than a year ago.

Today I've laid out gaming results for the quarter for Macau using gaming volume. Rolling chip volume is a measure of VIP play, non-rolling chip drop is a measure of mass-market play, and EBITDA is a proxy of a casino's cash flow. Learn more about what these numbers mean in "Your Guide to Understanding Casino Earnings."

You can see how gaming trends are favoring The Venetian Macau, Sands Cotai Central, and Four Seasons Macau, which are on Cotai. The mass market is also heavily drawn to Cotai, partly because it's built as an entertainment attraction instead of a seedy gambling area. Cotai's growth is great, but Sands Macau on the Macau Peninsula is losing share as a result, which will probably be the case for neighbors Wynn Resorts and MGM Resorts as well.

Property

Rolling Chip Volume

Non-Rolling Chip Drop

Property EBITDA

The Venetian Macau

$14.15 billion

+26.4%

$2.00 billion

+75.7%

$357.2 million

+19.5%

Sands Cotai Central

$15.55 billion

+71.7%

$1.43 billion

+163.7%

$224.3 million

+317.7%

Four Seasons Macau

$10.45 billion

+16.6%

$272.3 million

+145.8%

$112.9 million

+107.5%

Sands Macau

$5.23 billion

-23.3%

$877.4 million

+18.7%

$89.9 million

+11.1%

Source: Las Vegas Sands earnings release.

One of the drivers of the massive growth was 200 additional table games awarded to Las Vegas Sands in January of this year. Table games are the big limiting factor to growth in Macau, so an award of that size and the casino space built to handle them will singlehandedly boost results, particularly in the mass market.

The other big improvement over a year ago was luck at Marina Bay Sands. The casino won just 1.79% of rolling chips bet a year ago but won 2.85% last quarter, in the middle of its expected range. So, while rolling chip volume was up 16.9%, overall casino revenue was up 33.4%.

What we learned in Q3
This quarter, I think we're starting to see what long-term earnings will look like for Las Vegas Sands. Luck didn't swing wildly one way or the other, as it has in the past, and I think we're at a steady state of tables in Macau.

I'd expect growth to continue to be slightly above the overall Macau market, which grew 19.6% in the quarter, driven by the mass market. The same should be the case for Melco Crown's City of Dreams, which has grown rapidly as Las Vegas Sands has expanded. On the flip side, Wynn Resorts is relegated to hoping for constant revenue until its Cotai resort is done in 2016.

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8/22/2014 4:03 PM
LVS $69.21 Down -0.04 -0.06%
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