Viral outbreak’s effect on Macau dominates Las Vegas Sands quarterly earnings discussion

ID 93422340 © Tommy Alvén | Dreamstime.com
Howard Stutz has over 30 years of experience reporting on the gaming industry.

China’s coronavirus outbreak and its impact on Macau dominated the question and answer session during Las Vegas Sands’ quarterly conference call with the investment community Wednesday.

With travel restrictions keeping visitors away from Macau during the normally lucrative Chinese New Year holiday, Las Vegas Sands officials were hard-pressed to provide detailed answers concerning the world’s largest gaming market, where the company collected 63% of its overall revenues during the fourth quarter.

One Hong Kong-based gaming analyst said the market could experience has much as a 21% decline in January gaming revenues.

Las Vegas Sands President Rob Goldstein said visitation to the company’s eight Macau properties is down roughly 80% since the New Year’s holiday began.

Goldstein says all employees in the company’s properties, including dealers and casino floor personnel, are wearing protective face masks. The company is also screening all customers for signs of the virus as they enter the building.

“We’re in constant contact with the government. We speak daily,” Goldstein said.

In prepared remarks, Las Vegas Sands Chairman and CEO Sheldon Adelson called the situation in Macau “unique and serious.” The company is the largest American-based casino operator in the special administrative region.

“Our top priority is the health and safety of our employees and guests, and we are doing everything we can to support the government, both in Macau and China,” Adelson said. “Our Sands China team is in close consultation with the relevant healthcare and public safety authorities in Macau, and we have implemented significant procedures and safeguards. We will continue to implement measures in line with government direction and hope for a swift containment of the virus.”

During the quarter that ended Dec. 31, Las Vegas Sands collected $2.21 billion in revenue from its Macau properties, a decline of less than 1% compared to the 2018 fourth quarter. Analysts blamed the drop on the December visit by China’s President Xi Jinping to celebrate the 20-year anniversary of Macau becoming a Special Administrative Region of China.

Adelson, at the outset of his remarks, talked in glowing terms about Macau’s potential. Las Vegas Sands is spending $2.2 billion to convert the Sands Cotai Central into the Londoner resort while adding non-gaming amenities, entertainment, meeting space and other attractions.

“I believe Macau has the opportunity to become the greatest business and leisure tourism destination in the world,” Adelson said. “We stand ready to make substantial additional investments to contribute to Macao’s future success.”

Goldstein, in response to an analyst’s question, said unlike tourism, the construction projects haven’t been disrupted by the corona virus.

“We don’t anticipate any slowdown with the virus,” Goldstein said. “We’re full speed ahead on all our projects in Macau.”

He was hard pressed to say when Macau would see signs recovery, but he had no doubt the market would stage a comeback.

“When they do resolve this, Macau will be very busy. (Customers) will come back in force,” Goldstein said. “We just don’t know when that will happen. This storm will pass. We don’t know when. But we’ll be first in line as an investor in this market.”

Overall, the company’s fourth quarter results included a 1% increase in revenues to $3.51 billion, led by a 17.5% increase in revenues from Marina Bay Sands in Singapore. The company’s two casinos in Las Vegas grew revenues 12% to $475 million. Cash flow in the quarter was $1.39 billion, up 9.1%, and net income was $783 million, which reversed a net loss of $40 million a year earlier due to the 2018 U.S. tax reform.

The company is also spending $3.3 billion in Singapore to add a 15,000-seat arena and entertainment venue, a new hotel tower and additional convention and meeting space. Adelson pointed out that Marina Bay Sands’ retail space had annualized sales per square foot of $2,000.

“Singapore’s leading tourism infrastructure continues to receive significant investment,” Adelson said. “We are excited to be a part of Singapore’s continued growth as a leading business and leisure tourism destination.”

For all of 2019, Las Vegas Sands had total net revenues of $13.74 billion, a less than 1% increase. Revenues from Macau accounted for $8.8 billion, which was 64% of the company’s overall total. Las Vegas Sands said it total 2019 cash flow was $5.39 billion with a net income of $3.3 billion.

Adelson remarked that he and his wife, Miriam, attended the signing ceremony at the White House this month for Phase One of the trade deal between China and the U.S.

“The United States and China coming together to work collaboratively on the future of global trade is good for the United States, it’s good for China, and it’s good for the rest of the global economy,” Adelson said.

Shares of Las Vegas Sands, traded on the New York Stock Exchange, closed at $64.70 on Wednesday, up 29 cents or 0.45%. The price was up less than 1% in after-hours trading.