Marina Bay Sands Q3 earnings slide on weaker VIP segment

Singapore

A SLUMP in VIP play at Marina Bay Sands has dragged third-quarter Ebitda (earnings before interest, tax, depreciation and amortisation) down 5.2 per cent to US$419 million from the same period a year earlier.

Lower casino rolling chip volume - which typically refers to VIP play - tumbled 24.9 per cent from the same period a year earlier to US$7.1 billion in the three months ended Sept 30.

Total casino revenue slipped 8.7 per cent to US$532 million, as a 2 per cent increase in the mass win-per-day for non-rolling tables and slots failed to make up for the drop in VIP visitors.

The slower casino business offset growth in Marina Bay Sands' hotel and non-gaming businesses.

Net revenue fell 2.9 per cent to US$766 million, although room revenue rose 12.8 per cent to US$106 million, while food and beverage sales rose 15.2 per cent to US$53 million. Mall revenue rose 4.8 per cent to US$44 million.

Robert Goldstein, president and chief operating officer of Las Vegas Sands Corp, which runs Marina Bay Sands, said in an earnings call on Wednesday night: "The outlier is the VIP business... What's ironic (is) the team there has effectively grown the margins by double from a 15, 16 per cent business to a 30 per cent-plus business. The struggle there is growing the top line. And so we've struggled there, and we're going to keep struggling. It's not a growth business in terms of the rolling business."

Sheldon Adelson, chairman and chief executive, said that Marina Bay Sands still generates stable cash flow: "Both our hotel and our overall non-gaming revenues increased by more than 12 per cent over the prior year."

Retail tenant sales per square foot at The Shoppes at Marina Bay Sands jumped 22.2 per cent in the last 12 months, Mr Adelson added.

Hotel occupancy was 97.5 per cent in the third quarter, up from 96.6 per cent in the third quarter last year. The average daily rate was US$466, up 4.3 per cent, while revenue per available room rose 5.3 per cent to US$455.

UOB Kay Hian analysts led by Vincent Khoo wrote on Thursday that Marina Bay Sands' latest report card marked the fourth straight quarter of a year-on-year drop in VIP gaming volume.

But rolling chip volume improved 24 per cent on a quarter-on-quarter basis, they noted.

The analysts stuck to a bullish call on Genting Singapore, which operates Resorts World Sentosa, expecting a "stable quarter" when the rival casino operator reports results.

"We expect third quarter gaming volume for both mass and VIP segments... We estimate VIP volume to be flat year-on-year in the second half of 2018, given the generally weaker macro environment and increasing competition from emerging casinos from Indo-China."

Genting Singapore now trades at a "historically low valuation, well below most regional peers, and should begin to significantly rerate in 2019 as newsflow on Japan's integrated resorts concession bidding gains momentum", the broker said.

Genting Singapore shares fell 2.2 per cent to close at S$0.89, amid a broad market sell-off on Thursday.

As a group, Las Vegas Sands Corp's third quarter results missed both revenue and earnings forecasts, though the casino giant announced that it would hike dividends for the 2019 calendar year.

Las Vegas Sands' third-quarter Ebita rose 6 per cent to US$1.28 billion, lifted by its stronger Macau business. Net income rose 2.2 per cent to US$699 million.