In Spite of Fears, Macau Casinos Keep Firing on All Cylinders

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Economic volatility in China and uncertainty over regulatory changes that could hurt credit availability for gamblers in Macau are weighing on major casino operators such as Las VegasSands , Wynn Resorts , and Melco Crown lately. However, judging by recent earnings reports, the three companies continue performing remarkably well.

Las Vegas Sands delivered an increase of 21.4% in total revenue during the first quarter of 2014, to $4.01 billion, comfortably beating analysts' expectations of $3.84 billion for the period. Adjusted net income per share grew 36.6% to $0.97, also above estimates of $0.92 per share for the quarter.

Net revenue in Singapore grew 5.1% to $835.4 million, while adjusted property EBITDA in the country increased 9.7% to $435.2 million. Performance was much weaker in Las Vegas, though, as sales fell by 7% to $382.7 million and adjusted property EBITDA declined by 29.7% to $79.7 million. The same goes for Pennsylvania, where sales fell by 4.6% to $117.2 million and adjusted property EBITDA was down 11.4% year over year to $26.5 million in the quarter.

But Macau continues performing extraordinarily well for Las Vegas Sands, and the company is reaping big benefits from its leadership position in such a lucrative growth market. Sands China delivered an explosive increase of 34.7% in sales to $2.72 billion, while adjusted property EBITDA in Macau grew 49.8% to $938 million.

The Venetian Macau was a major growth contributor for Las Vegas Sands during the quarter, with sales increasing 35.8% to $1.2 billion. Sales at Sands Cotai Central and Four Seasons Macau were also very strong, with sales increases of 40.9% and 65.8%, respectively, to reach $827.6 million and $370.0 million during the quarter.

All in all, Las Vegas Sands is generating outstanding performance in its main Macau properties, and this is producing rock-solid growth rates at the total company level.

Wynn Resorts delivered better than expected sales and earnings during the first quarter of the year. Total sales increased by 10% to $1.51 billion versus the $1.49 billion expected by analysts, while earnings per share grew 14.3% to $2.32 versus the $2.07 per share forecast on average by analysts.

Like Las Vegas Sands, Wynn Resorts is reporting lackluster performance in Las Vegas, where net revenues decreased by 1.5% to $380.9 million.

However, it's important to note that founder and CEO Stephen Wynn believes the situation is finally turning around in Las Vegas, and this could provide a major boost to profitability in the coming quarters: "I must say that this year, for the first time, I'm willing to say that I see Las Vegas getting a footing that it hasn't had quite as clearly in the past."

Revenues in Macau grew 14.2% to $1.13 billion versus $992.1 million in the first quarter of 2013, while adjusted property EBITDA in the region increased by 16.2% to $384.3 million.

Even if Wynn Resorts is not growing as rapidly as Las Vegas Sands or Melco Crown in Macau, the company is still generating solid performance in the region thanks to its leading position in the VIP segment. Besides, a turnaround in Las Vegas could be a big positive for Wynn Resorts in the medium term.

Melco Crown delivered an increase of 19% in sales during the first quarter of 2014 to $1.36 billion; the number was roughly in line with forecasts. Earnings per share came in above expectations, though, at $0.45 per share versus $0.41 per share forecast on average by analysts.

Adjusted property EBITDA increased by 31% to $387.5 million versus $249.9 million during the same quarter in the prior year. Adjusted EBITDA margin expanded by 280 basis points to 28.5% of revenues, due mainly to a greater proportion of sales coming from the higher-margin mass market.

Revenues at City of Dreams increased by an impressive 28% to $1.07 billion during the quarter, while adjusted EBITDA jumped by an even stronger 38% to $341.4 million.

Altira Macau, which is more focused on the VIP segment, delivered subpar performance, though, as sales declined by 13% to 229.8 million and adjusted EBITDA fell by the same percentage, to $34.8 million in the quarter.

Even if the VIP business is showing some weakness, growing mass-market revenues bode well in terms of overall growth and profitability for Melco Crown over the coming quarters.

Considering the latest earnings reports from Las Vegas Sands, Wynn Resorts, and Melco Crown, casino operators with big exposure to Macau are still performing remarkably well in spite of fears over an economic slowdown in China or reduced credit availability for gamblers. They say the house always wins, and these casinos keep winning, even under challenging conditions.

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