Shares of Las Vegas Sands (LVS, Financial) have been on a decline for quite some time now. Its stock price has plunged 23.3% since the beginning of this year. Also, its quarterly earnings missed the estimates in two out of the last three quarters. One of the reasons has been unfavorable conditions in China, which are dragging down the performance.
However, this time the case is different. Despite all the prevailing problems, Las Vegas Sands managed to register a decent quarter, wherein its earnings beat the Street’s expectations. Let us get into the details.
The details of the quarter
Revenue for the quarter dropped 1% to $3.47 billion as compared to the previous year. This was mainly because of weakness in Macau business. Revenue from the Macau region fell due to smaller bets and less number of visits at the casinos. Moreover, this region makes two-thirds of the total revenue. Therefore, weakness in this region affected the top line.
The new president of China has introduced an anti-corruption campaign, which has kept people away from casinos. Furthermore, the ban on smoking in the Macau region has resulted in lower interests of the people.
Nonetheless, there are many positive points to be considered in this quarter. For instance, the bottom line of the company surged 7.25% to $0.83 per share, over last year. Also, it met the analysts’ expectations. This means that the company has been able to earn well despite all the prevailing problems. This is mainly because of its dependence on mass market gaming, which is more profitable than VIP gaming.
Mass market table wins in Macau surged 14%, whereas VIP gaming was down by 22%. Moreover, mall revenue in Macau increased 17.5% over last year, which contributed largely to the growth. Similarly, mass market wins in Singapore increased along with an increase in the room and mall revenue. Thus, the casino retailer performed well in the mass market category, resulting in higher profits.
Future
There are some positive points which need to be considered for Las Vegas Sands’ future. First, it has a leading position in the Cotai strip, especially in the mass market category. Further, it has 4 resorts in the Macau region and a new one, called The Parisian, will be added by the end of next year. This should help in attracting more customers, leading to higher revenue.
Moreover, there are a lot of opportunities for casino chain operators in the regions such as Japan and South Korea. These regions have decided to allow resorts to be built in the region. This will bring in scope for expansion for Las Vegas Sands.
However, overall revenue has been declining in the Macau region for the last few months, which is a matter of concern. Further, gross revenue for the month of September fell 11.7%. Thus, the company needs to focus on this area.
Finally
Lower demand in Macau has been a problem for all the casino chains, and Las Vegas Sands is not an exception. However, it has managed to post a decent quarter because of its focus on the mass market category. The company has also repurchased shares as a part of its $2 billion share repurchase program. Furthermore, it has increased its dividend for 2015 to $2.60 per share. This has delighted its investors. Therefore, one should not ignore this rewarding company.
