Sands China 3Q net loss worsens sequentially, revenue up

Sands China 3Q net loss worsens sequentially, revenue up

Sands China Ltd, the Macau unit of United States-based casino group Las Vegas Sands Corp, reported a wider loss in the third quarter as compared to the April to June period. That was despite a slight revenue rebound driven by better luck in the VIP sector.

The company posted a net loss of US$562 million in the third quarter, slightly worse than the US$549-million loss in the second quarter. The result was a far cry from the net income of US$454 million that Sands China reported in the third quarter of 2019.

In Singapore, where Las Vegas Sands operates Marina Bay Sands, net revenues jumped from US$23 million in the second quarter to US$281 million. The improvement was related to the fact that the property was temporary closed from April until the end of June. Still, third quarter revenue was down 64.6 percent in year-on-year terms.

Adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) at Marina Bay Sands stood at US$70 million fo the three months ended September 30. It represented a year-on-year decline of 83,9 percent, but a sequential improvement over negative EBITDA (-US$113 million) recorded in the second quarter of 2020.

Las Vegas Sands’ operations in Macao were the biggest contributor to the group’s overall net loss of US$731 million in the third quarter, smaller than the loss of US$820 million in the second quarter.

In a note commenting on the Sands group latest results, brokerage Sanford C. Bernstein Ltd stated that Las Vegas Sands’ third quarter EBITDA (-US203 million) beat consensus estimates… driven largely by outperformance in Singapore.”

Analysts Vitaly Umansky, Kelsey Zhu and Tianjiao Yu stated: Sands China’s third quarter EBITDA of -US$233 million (-131 percent year-on-year) was also above consensus estimates (-US$242 million).

Sanford Bernstein noted that operations both in Macau and Singapore had seen high VIP-hold for the quarter: 4.07 percent for Sands China and 4.23 percent for Marina Bay Sands). “But the numbers themselves were not critically important as investor focus is on recovery trajectory,” noted the brokerage.

In commentary solely focused on Sands China’s third quarter performance, brokerage Jefferies Group LLC said that the losses posted by the company were “not a surprise”, as already broadly expected by investment analysts. “However, management appear relatively positive on the outlook,” noted analyst Andrew Lee.

Sequential improvements

Sands China’s loss on adjusted property EBITDA was US$233 million for the three months ended September 30, 2020, 25.3 percent smaller than in the second quarter.

Net revenues at Sands China fell 91.9 percent year-on-year, to US$171 million, from US$2.11 billion a year earlier. But the company saw its revenues more than triple from the second quarter’s US$47 million.

An earnings presentation issued with the results stated that “the low levels of revenue generated in the third quarter of 2020 reflect meaningfully reduced visitation to the market.”

The major reason for the recovery was better luck in its VIP table game segment. In the second quarter Sands China posted US$1.27 billion rolling chip volume but its win percentage was negative (-0.59 percent). In the third quarter the rolling chip volume on VIP table games fell to US$1.05 billion but the rolling win percentage swung to 4.06 percent.

Starting from August 26 as part of travel-easing measures following the initial impact of Covid-19, eligible residents from the neighbouring mainland province of Guangdong have been allowed to apply for an exit visa for tourist trips to Macau, either as part of a tour group or under China’s Individual Visit Scheme programme. The measure was extended to residents from other mainland regions from September 23.

Results in Sands China’s mass market segment also improved, with the firm posting a quarterly table game win of US$55 million, up from just US$10 million in the previous quarter. A year earlier Sands China had posted US$1.44 billion in mass market tables games win.

Sands China’s hotel segment also posted quarter-on-quarter improvement, with occupancy bouncing from just 2.5 percent in the second quarter to between 7.6 percent at the company’s flagship Venetian Macao and 14.5 percent at Sands Macao in the three months ended September 30.

The chairman and chief executive of Las Vegas Sands, Sheldon Adelson, said in a press release issued alongside the results: “I am pleased to say the recovery process from the Covid-19 pandemic continues to progress in each of our markets.”

He added: “We are fortunate that our financial strength supports our previously announced capital expenditure programs in both Macau and Singapore, as well as our pursuit of growth opportunities in new markets.”

Group capital expenditure in the second quarter was US$376 million, including construction, development and maintenance activities amounting to US$279 million in Macau, where Sands China is rebranding Sands Cotai Central as Londoner Macao.

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