Las Vegas Sands announced 2nd quarter earnings on July 22nd, after the close. Net revenue decreased 19.4% to $2.92 billion compared to $3.62 billion in the 2nd quarter of ‘14. This missed consensus by $70 million; adjusted EPS of $ 0.60 also missed by only a penny. Operating income in the second quarter also decreased 28.3% to $689.3 million compared to $961.5 million YOY. This can be mainly attributed to soft results in Macao. The following day the stock opened at its high of the day $57.15. Throughout the day the stock dropped back to a price of $55.74 for the close.
Highlights for the company include
The Macao operations managed to improve EBITDA margin by 200 basis points to 32.2% on quarter-to-quarter basis.
The Sands China (the 70% owned subsidiary) EBITDA of $569 million, represents a 29% decline over the prior year, but a 6% sequential increase over the previous quarter. This is exactly the type of sign we are looking for in terms of the Macao turn around. In addition, the gaming revenue market share in Macao reached 24.6% for the quarter, which is the highest since Q1 of ’09. This was achieved while being disciplined about the casino reinvestment expenses as evident by the EBITDA margin increases.
The company’s highly valued Macao VIP gaming segment is currently out performing the regions market. Overall LVS’s Macao properties rolling volume (chips used by VIP’s) declined 10% sequentially versus the 15% decline in Macao’s VIP junket volumes.
Marina Bay Sands (the Singapore casino) delivered another solid quarter, which despite the impact of the stronger U.S. dollar generated adjusted property EBITDA of $363 million. As well on a constant currency basis, the property’s normalized EBITDA was up 6%.
During the earnings conference call Adelson, the CEO and founder was adamant regarding return of capital to shareholders. He stated “We remain committed to the maintenance of our generous recurring dividend program and we remain committed to increasing those recurring dividends in the future.” This is very positive to hear for shareholders as it is keeping many satiated until Macao rights itself. This statement is by all mean feasible due to the company’s industry leading cash flows and balance sheet strength. During this quarter LVS bought back 1.3 million shares at an average price of $50.46.
As the company sticks to their critical mass, the very in-depth entertainment and consumer attraction components of the integrated resort model, LVS will maintain its dominance of the industry. The investment thesis remains strong, as it seems the Macao turn around has slowly begun.