Marina Bay Sands is likely the most profitable resort and casino in the history of the gaming industry. One of only two casinos in Singapore, Las Vegas Sands' (NYSE:LVS) crown jewel generates more than $1.5 billion of property EBITDA, a proxy for cash flow, each year, and has been an incredible success in Asia's gaming market.
As profitable as Marina Bay Sands has been, though, it's nearly a decade old, and EBITDA has stagnated and even fallen recently. The problem is that Asia's gaming market is only getting more competitive, and Marina Bay Sands may not be the best positioned to grow.
What's going on at Marina Bay Sands
The chart below shows Marina Bay Sands' quarterly property EBITDA since 2011, shortly after the resort opened. You can see that there hasn't been much growth in the trendline, and if we dig deeper into the numbers we can see a sharper decline beginning in 2018.
Each quarter, Las Vegas Sands reports the rolling chip and non-rolling chip volume of tables in the casino. These are measures of the VIP and mass market play, respectively, but they remove luck. In every quarter in 2018 we see VIP play on the decline, and in three of four quarters mass market play fell versus a year ago.
The drop in play isn't reflected in the EBITDA numbers above because 2018 has been an unusually lucky year for Marina Bay Sands. The first quarter in particular saw the casino win almost 50% more than normal luck would expect. Without that lucky quarter, results would likely show a decline in EBITDA shaping up.
The key for Las Vegas Sands
Trends for Marina Bay Sands are important because the resort generates nearly a third of Las Vegas Sands' EBITDA overall. If revenue and EBITDA are falling, as gaming volume would predict, that doesn't bode well for the company's financial performance going forward. This isn't to say that Marina Bay Sands is a bad asset -- far from it. But we may have already seen the peak performance of the resort.
Competition is already starting to creep into Asia, with Macau expanding gaming, Korea and the Philippines opening resorts, and Japan considering mega-resorts for itself. When Singapore was the only game for thousands of miles around it was a logical stop for gamblers, but now it's facing stiff competition.
There's also fear, based in evidence, that China's economy may be starting to slow down. China fuels Asia's economy, and if it slows down there will be repercussions for Marina Bay Sands. If the resorts' performance has stagnated in a growing economy, it doesn't bode well for trends in a bad economy.
Investors should keep an eye on Marina Bay Sands' gaming volume trends over the next few quarters for further deterioration in gaming. If players are no longer gambling like they used to it would be a huge hit to the company's earnings, and given the resort's size it would be a tough loss of revenue to make up.