Macau market improving as Las Vegas Sands posts higher first-quarter earnings

Key Points
  • Macau growth accelerating for third consecutive quarter
  • Las Vegas operations turn in best showing since 2008
  • Management optimistic about eventually getting nod to enter Japan
A croupier deals a card on a blackjack table inside the Venetian Macao resort and casino, operated by Sands China, in Macau, China.
Bloomberg | Getty Images

Las Vegas Sands Corp. late Wednesday reported first-quarter earnings ahead of expectations, reflecting strong Las Vegas operations and an improvement in the Macau market.

Also, management was optimistic on the earnings call about the chances of getting approval to eventually open a casino resort in the Japanese market.

Despite the beat, the stock dipped just over 1 percent in after-hours trading but started to recover after the call.

"After a challenging period the Macau market is growing again — and its growth rate has been accelerating for three consecutive quarters," said Chairman and CEO Sheldon Adelson on the company's earnings call.

At the same time, the Las Vegas operations delivered its best quarter since 2008, Adelson said.

The company's Venetian Las Vegas and Palazzo properties, including the Sands Expo and Convention Center, posted better results.

Here's how the company did in the quarter compared with analysts' consensus estimates:

• EPS: 66 cents a share vs. 62 cents a share expected by analysts polled by Thomson Reuters.
• Net revenue : $3.11 billion, or generally inline with expectations.

Adjusted EPS was up by 40 percent to 66 cents, while GAAP EPS grew by 50 percent to 60 cents a share. Revenue rose 14 percent.

Overall, adjusted property EBITDA, or earnings before interest, taxes, depreciation and amortization, increased about 25 percent in the quarter compared with a year ago and were above Street consensus.

By segment, the Macau operations grew adjusted property EBITDA by 20 percent on a year-on-year basis in the quarter. It was driven by 17 percent growth in mass gaming revenues.

The Las Vegas operating properties showed adjusted property EBITDA up by 40 percent compared with the year-ago period. It said contributing to the strong results were the Venetian Las Vegas and Palazzo properties, as well as record convention and group meeting business.

EBITDA is considered an important metric of operating profit performance for casino companies because it essentially neutralizes the impact of the company's capital structure and deducts interest expense, taxes and depreciation charges.

Meantime, Adelson was asked on the earnings call about the U.S.-based casino giant's growth plans in the Asian market. Besides the company's Macau operations, it also has a presence already in the Singapore market.

"Japan is what everybody is talking about," Adelson said. "We have been informed by people in the know in Japan that LVS (or Las Vegas Sands) is by far, not just marginally, but by far ahead of the other competition" to get the integrated resort approval.

Last year, Japan took steps to legalize Las Vegas-style casino resort gaming, which could allow for casino and hotel space as well as convention facilities and retail space. The Japanese government hasn't formally selected the companies for casino development but Las Vegas Sands and its competitor MGM Resorts have openly indicated they are indeed interested.

The casino mogul said there's a possibility the Japanese government could allow the company more than one so-called "integrated resort" property. To be clear, nothing is finalized and he questioned whether the Japanese would even allow a foreign entity to have two casino locations.

As for other Asian markets, Adelson said the company is looking at Vietnam, Thailand and South Korea.

He added that the South American market was attractive too.

-Clarification: Beat on EPS based on adjusted earnings per diluted share of 66 cents, not the GAAP EPS figures reported.