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A "Impressive Recovery" in Macao Could Help Lift Las Vegas Sands Stock

The pandemic dealt a tough blow to casino resorts, but business is gearing up again.

With its Singapore resort humming along nicely and Macao back open for business, Las Vegas Sands (LVS 2.62%) is focused on recovery and a bright future. Let's look at the company's recent quarterly results to get a better idea of where the casino stock might be headed.

Marina Bay Sands set a new quarterly earnings record

In the first quarter of 2023, Las Vegas Sands' revenue rose 125% year over year to $2.1 billion. Its Marina Bay Sands property in Singapore led the way, generating revenue of $848 million. Las Vegas Sands now operates six resorts -- five in Macao and one in Singapore -- after recently completing the divestiture of its Las Vegas properties for $3.6 billion.

For the quarter, Marina Bay Sands delivered $394 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) -- a new company record. Mass gaming revenue at the property also set an all-time high of $549 million. 

During the earnings call last week, CEO Rob Goldstein stated that "Singapore is doing very well," emphasizing that the property's rolling volume now matches 2019's. And with a $1 billion renovation in progress, Marina Bay Sands will expand from 150 to 400 suites by year's end.

Macao is back

In another earnings call highlight, Goldstein affirmed, "There's a powerful recovery underway in Macao in both gaming and the non-gaming segments. The future looks very good for both markets."

Mass gaming revenue among Sands' five resorts in Macao totaled $1 billion in Q1 for the first time since 2019, and adjusted property EBITDA hit $398 million. Compared to Q1 2022's EBITDA loss of $11 million in Macao, things are certainly looking up. As Goldstein put it, "Business is back."

General conditions in Macao appear to be improving as well, with overall citywide visitations up 22% in March versus January and February levels, according to Kwan Lock Chum, Sands' executive VP of Asia Operations. 

Some headwinds remained

Despite the recovery, the lingering effects of travel restrictions continued to plague Las Vegas Sands' Macao operations in the first quarter, resulting in reduced visitation and guest spending.

On the bright side, while visitation to Macao from China was only 39% of 2019 levels, Sands' Macao operations yielded $398 million in adjusted EBITDA (46% of 2019 levels). If Sands China can ramp up visitation, earnings surprises in future quarters could impress investors and analysts alike.

The renovation in progress at its Marina Bay Sands property in Singapore also diminished performance in the quarter. The project, which is projected to be completed by the end of 2023, left fewer rooms available for guests and has caused interference within the casino gaming area.
Looking ahead

Goldstein remarked that he was impressed by Singapore's strong Q1 performance, and said he thinks Marina Bay Sands could drive $500 million per quarter in EBITDA once the Asian gaming market reaches full steam.

With a recovery in sight, Sands' next priority is growth. Its $1 billion Singapore project should finish by the end of 2023, and a recent $3.8 billion investment in Macao as part of a concession tender "is just the baseline," according to Goldstein. 

Emphasizing what he described as Sands' "unique position" to capture opportunity in China, he explained, "Our focus is on all segments of the Macao market, including international tourists." The company is investing in areas including non-gaming features such as live entertainment, convention hosting, and dining. 

Chief Operating Officer Patrick Dumont explained that compared to January and February, margins recovered "to a more normal level" in March, and said that the long-term margin outlook is "quite strong."

"Given the mix of business," he commented, "we should see a favorable margin operating environment." Investors should pay close attention to future earnings reports and see if Las Vegas Sands' net profit margin -- currently at a negative 10.4% -- turns positive and increases over time.

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Preview Image: Shutterstock 
Publishing Date of News 29th April 2023