Strong Macau Results Drive Las Vegas Sands Earnings - Analyst Blog

Shares of Nevada-based casino and hotel operator, Las Vegas Sands Corp. LVS scaled up as the company posted first-quarter 2014 results which beat expectations on both the counts. The earnings beat was attributable mainly to the robust performance at Macau, the world's largest gambling market.

Adjusted earnings of 97 cents per share increased 36.6% year over year and beat the Zacks Consensus Estimate of 92 cents by a nickel. The upside reflected higher revenues.

Adjusted earnings exclude pre-opening expense, development expense, loss on disposal of assets and loss on modification or early retirement of debt.

Quarterly net revenue increased 21.4% year over year to $4.01 billion but beat the Zacks Consensus Estimate of $3.84 billion by 4.4%. The top line reflects higher revenues at Sands China Ltd., The Venetian Macao, Sands Cotai Central, Four Seasons Hotel Macao and Plaza Casino, Sands Macau and The Marina Bay Sands.

Despite a 15.7% year-over-year increase in operating expenses, operating margin expanded 320 basis points (bps) to 27.1% in the quarter, driven by solid operating performance at the Macau properties.

Property Details

Las Vegas Operations (The Venetian Casino and The Palazzo)

Net revenue from the Las Vegas operations, which comprise The Venetian Las Vegas and The Palazzo, declined 7.0% year over year to $382.7 million, mainly due to drop in Casino revenues.

During the quarter, revenue per available room (RevPAR) increased 12.0% year over year to $214.0 million with a 14.2% rise in average daily rate (ADR). Adjusted property EBITDA declined 29.7% year over year to $79.7 million.

Sands Bethlehem, Pennsylvania

Net revenue at Sands Bethlehem was $117.2 million in the quarter, down 4.6% year over year, due to lower casino as well as food and beverage revenues. Room revenues increased 12.5% year over year with a 12.2% rise in RevPAR and a rise of 350 bps in occupancy rate. Adjusted property EBITDA was down 11.4% year over year to $26.5 million in the quarter.

Macao Operations

The company's Macao business includes the following resorts:

The Venetian Macao

The Venetian Macao played a major role in augmenting the company's revenues. Net revenue increased 35.8% year over year to $1.2 billion at The Venetian Macao with a substantial increase in casino revenues. Rolling Chip volume was up 31.2% year over year to $15.3 billion. The property witnessed solid traffic during the quarter.

RevPAR increased 18.9% in the quarter with a 15.6% rise in ADR. Adjusted property EBITDA was up 34.9% year over year to $470.1 million in the fourth quarter driven by increase in Rolling Chip volume and Non-Rolling Chip Drop.

Sands Cotai Central

Net revenue at Sands Cotai Central climbed 40.9% year over year to $827.6 million. The quarterly revenues were driven by higher casino revenues, room revenues and strong traffic. In the quarter, Rolling Chip volume increased 13.8% year over year to $15.5 billion.

Adjusted property EBITDA was $265.2 million, up substantially year over year. RevPAR hiked 45.4%, driven by ADR growth of 16.4%. Visitation to the property continues to grow and approached 4.8 million visits in the quarter.

Four Seasons Macao

Revenues at the Four Seasons Hotel Macao and Plaza Casino surged 65.8% to $370.0 million mainly due to a rise in Casino and Mall revenues. Further, adjusted property climbed substantially year over year to $113.0 million. Four Seasons recorded RevPAR increased 23.9%, driven by 15.9% rise in ADR.

Sands Macao

Sands Macao's revenues were up 1.2% year over year to $314.0 million mainly driven by room revenues. However, adjusted property EBITDA declined 5.4% year over year to $91.4 million. Sands Macao's RevPAR was up 21.5%, driven by 18.7% rise in ADR.

Marina Bay Sands, Singapore

Revenues at Marina Bay Sands were up 5.1% year over year to $835.4 million in the quarter. Sands recorded 14.2% RevPAR growth, driven by 13.2% rise in ADR. Adjusted property EBITDA increased 9.7% year over year to $435.2 million.  

Our Take

Las Vegas Sands currently has a Zacks Rank #2 (Buy).

Going forward, we believe the company's high gaming potential at prime locations, such as Las Vegas and Macao, will aid market share gain. Moreover, the company's upcoming projects in the Cotai Strip are expected to spur growth. Further, Las Vegas Sands' strong brand portfolio, solid Macao mass market revenues, and increasing traffic in Macao will bode well for the company in the upcoming quarters. However, we remain cautious of the sluggishly recovery economy, which may limit consumer spending in the near term.

Among other stocks in the same sector, MGM Resorts International MGM is expected to report its results on Apr 29, whereas Melco Crown Entertainment Ltd. MPEL will report on May 14. Another stock, Boyd Gaming Corp. BYD is expected to announce its earnings on Apr 30.