There's no way to sugarcoat it: The numbers coming out of Las Vegas Sands (NYSE: LVS) aren't good. A quarter after reporting record revenue and more than $1 billion in EBITDA, the company saw EBITDA decline and revenue only grow 10.1% despite opening an enormous new resort. Luck played a role, just like it did at Wynn Resorts (Nasdaq: WYNN) last quarter, but the results show more than just bad luck holding the company down.
The numbers
First, let's focus on the company's two main properties, Marina Bay Sands and The Venetian Macau. Marina Bay Sands had no more competition than it did in the first quarter or a year ago, but still it saw gaming revenue drop 7.5% to $550.2 million, overall revenue fell 5.8% to $694.8 million, and adjusted property EBITDA tumbled 18.5% to $330.4 million. The company had worse luck than last year but it wasn't wildly outside of normal ranges, so I wouldn't blame the performance on this alone. More important, rolling chip volume fell 5.9%, showing that high-end players played less in the quarter.
At The Venetian Macau the numbers were even worse, showing that Cotai Central is likely taking business. Casino, room, and convention revenue were all down, while promotional allowances were up year over year. Net revenue fell 11.7% to $649.4 million and adjusted property EBITDA fell 11.3% to $229.2 million. Again, high rollers played significantly less this quarter, with rolling chip volume down 16.5%, and unlike at other resorts, bad luck didn't play a significant role in the declining numbers.
Sands Cotai Central generated $265.6 million in revenue in the quarter and $51.8 million in EBITDA, likely stealing business from both The Venetian Macau and Melco Crown's (Nasdaq: MPEL) City of Dreams. We'll find out what the impact was when Melco releases its numbers.
Overall, revenue grew just 10.1% to $2.58 billion and adjusted property EBITDA fell a whopping 21% from last quarter to $844.7 million. Adjusted earnings per share were $0.44, below the $0.60 analysts expected and below the $0.54 in EPS the company reported last year.
The big question
After disappointing results from both Las Vegas Sands and Wynn Resorts, investors have to be concerned that the gaming boom in Macau is coming to a screeching halt. Growth has slowed dramatically and companies are paying higher commissions to junkets in an effort to get business. Add to that the increased capacity Sands Cotai Central brings to the table along with Lot 3, Wynn's new property, and another resort from MGM Resorts (NYSE: MGM).
The value in gaming stocks just isn't what it used to be, and with questions about growth in China and a weak global economy, gaming stocks may not be a good buy right now. Las Vegas Sands currently has an 8.7 enterprise value/EBITDA ratio, and considering the direction results are heading, I think that's expensive right now, at least until I'm more confident in the direction of China's economy.
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