GGRAsia – Sands China posts US$166mln 1Q loss amid Covid-19 crisis

Sands China posts US$166mln 1Q loss amid Covid-19 crisis

Apr 23, 2020 Newsdesk Latest News, Macau, Singapore, Top of the deck, World

Macau casino operator Sands China Ltd recorded a net loss of US$166 million for the first three months of 2020, compared to net income of US$557 million a year earlier. The firm’s results were negatively impacted by the Covid-19 crisis, and the efforts regionally and globally to contain the further spread of the pandemic.

Sands China reported net revenue of US$814 million on a generally-accepted accounting principles (GAAP) basis in the first quarter of 2020, compared to US$2.33 billion in the prior-year period – a 65.1-percent decline, according to a Wednesday filing by parent company, U.S.-based Las Vegas Sands Corp.

Adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) for Macau operations was US$67 million in the first quarter this year, down 92.2 percent from the first three months of 2019.

Sands China’s lowest level of quarterly EBITDA on record, “obviously … has little implication on forward estimates as it doesn’t really reflect its earnings power or level of end-demand,” said brokerage JP Morgan Securities (Asia Pacific) Ltd in a Thursday note.

The parent firm Las Vegas Sands reported a 51.1 percent year-on-year decline in group-wide revenue for the three months to March 31, at US$1.78 billion. Operating income for the period decreased 94.3 percent from a year earlier, to US$55 million. The group reported a net loss of US$51 million for the first quarter 2020, compared to net income of US$744 million a year ago.

Adjusted property EBITDA for the parent was US$437 million, a decrease of 69.9 percentfrom the prior-year quarter.

Las Vegas Sands also controls Marina Bay Sands Pte Ltd, the operator of the Marina Bay Sands casino resort in Singapore. The group also runs operations in Las Vegas, Nevada, in the United States.

First-quarter net revenues at Marina Bay Sands stood at US$612 million, down 20.2 percent from a year earlier, according to the parent company. Adjusted property EBITDA fell 33.3 percent year-on-year, to US$282 million. Casino revenue at the property fell 19.3 percent, to US$439 million.

Covid-19 impact

The group’s operations have been temporarily suspended – for different periods of time – in all three jurisdictions where it has a presence. In Macau, the government ordered in February a 15-day shutdown of gaming operations, and since the reopening of the market on February 20, the city’s casinos have been operating with limited capacity due to social distancing policies on gaming floors.

Singapore’s casino resorts are to remain closed until June 1, as the government there announced on Tuesday the extension of measures to stem the further spread locally of the Covid-19 infection. The shutdown was effective from April 7.

In Nevada, the governor initially ordered all casinos and other non-essential businesses in the state to close for 30 days with effect from March 18. He extended that instruction to run until April 30, and last week said he had no specific date for when non-essential businesses might be allowed to reopen.

Las Vegas Sands paid a quarterly dividend of US$0.79 per share on March 26, 2020. But the company announced last week that it was suspending its quarterly dividend programme due to the impact of the Covid-19 pandemic. The group nonetheless said that it would “continue previously-announced capital expenditure programmes in both Macau and Singapore”.

Sheldon Adelson, chairman and chief executive of Las Vegas Sands said on the group’s quarterly earnings call that it remained “confident that the recovery in travel and tourism spending, and the strength of our business model will enable us to deliver both growth and the return of capital to shareholders in the future”.

Property performance

Casino gross gaming revenue (GGR) for the Macau operations fell 66.2 percent in year-on-year terms, to about US$636 million.

According to Morgan Stanley Asia Ltd, Sands China’s VIP roll and revenue were down respectively 66 percent and 71 percent year-on-year in first-quarter 2020. Mass revenue declined by 63 percent from the first three months of 2019, “with premium mass down a bit more at 65 percent,” said the institution in a Wednesday note.

Jeffries Group LLC noted in a Wednesday memo that Sands China’s first-quarter results were “significantly lower but in line with consensus”.

“Negative EBITDA for February and March due to weak sector GGR, which we expect to continue given sector GGR continued to sequentially weaken,” said the brokerage. “In the near-term, we expect the company to remain loss-making … with US$3.5 million/day cost run-rate and we wait for restrictions to ease.”

The majority of Sands China’s EBITDA in the three months to March 31 came from the firm’s retail operations, with only the Venetian Macao and the Four Seasons recording positive results.

Rolling chip volume at the Venetian Macao (pictured) was down 69.7 percent year-on-year in the first quarter. Such roll was US$2.27 billion, compared to just above US$7.50 billion a year earlier. Non-rolling chip drop fell 63.9 percent year-on-year, to US$817 million.

At Sands Cotai Central – currently being revamped and converted into the Londoner Macao – rolling chip volume declined 91.4 percent year-on-year, to US$167 million. Non-rolling chip drop was down 67.3 percent year-on-year, to US$556 million.

The firm’s other properties – the Parisian Macao, Plaza Macao and Four Seasons Hotel Macao, and Sands Macao – also reported declines of more than 50 percent in rolling chip volume in the opening quarter of 2020.