Las Vegas Sands Q4: The Asia Bet Pays Off

Las Vegas Sands’ Parisian Macao

We might as well call this period “casino operator annual earnings season.” Las Vegas Sands (NYSE: LVS) just reported its results for the fourth-quarter and full-year 2017 frames, closely following on the heels of rival Wynn Resorts (NASDAQ: WYNN). In a few short weeks, it will be MGM Resorts International’s turn.

In pole position, Wynn did rather well for the quarter and the year. Can we say the same for Las Vegas Sands?

Asian ascent

We can.

Like Wynn, Las Vegas Sands notched convincing beats on both the top and bottom lines for the quarter. The company’s Q4 saw its net revenue increase by almost 12% on a year-over-year basis to $3.44 billion. Adjusted net profit increased a beefy 43% to $700 million ($0.88 per share), which excludes a non-cash income tax benefit of $526 million derived from the recent government tax reforms.

The average analyst estimate for net revenue was $3.27 billion, and for per-share adjusted net profit, the estimate was $0.77.

Growth was also in the cards for fiscal 2017 as a whole. Las Vegas Sands’ net revenue for the year was nearly $12.9 billion, a 13% improvement over the 2016 result. Adjusted net income came in 30% higher, at a shade over $2.4 billion.

Despite its name, Las Vegas Sands these days draws most of its revenue from the thriving Chinese gaming enclave of Macau. That’s good, because Macau is in recovery mode. After several years of declines (due to a government crackdown on casino junket operators that dampened visitor numbers), the region’s gaming take has improved greatly; for the entirety of 2017, its total rose by 19% to the equivalent of $33 billion.

As a result, most of the company’s properties in the enclave showed substantial improvements. Its top resort by revenue, the Venetian Macao, improved its take by 19%. Meanwhile, No. 2 Sands Cotai raked in almost 26% more. All told, Las Vegas Sands’ Macau revenue rose 13% to over $2.1 billion.

Macau wasn’t the only Asian hot spot for the company during the quarter. The Marina Bay Sands in Singapore posted a 14% improvement in net revenue, at $825 million.

Las Vegas Sands’ relatively small operations in the U.S. — which consists of the Venetian and Palazzo resorts, plus the Sands Expo and Convention Center in Las Vegas, and the Sands Bethlehem in Pennsylvania — saw a more modest rise. Combined, these facilities brought in net revenue of $564 million, up from the $551 million of Q4 2016.

Entertaining the masses

If we compare Las Vegas Sands’ top line to that of Wynn, the latter takes the prize for Q4 improvement — its overall net revenue rose by 30% to $1.69 billion.

Much of that is due to Macau, and much of the Macau growth was due to great improvement in the high-spending VIP segment. For 2017, VIPs collectively spent 27% more than they did in 2016, while the mass market rose by less than 10%. This is perhaps a key reason Wynn’s stock saw a nice pop after its Q4 results were made public. Las Vegas Sands’, by contrast, barely moved in after-hours trading following its release.

Still, the vastly improved health of the overall Macau gaming industry gives plenty of reason for optimism on Las Vegas Sands’ prospects for continued growth. Although there is concern that Chinese government policy could negatively affect the enclave’s casino business again, analysts are generally expecting more growth. That would almost certainly juice the results of Las Vegas Sands going forward.

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