Sands talks up Macau growth potential despite visitation concerns in Q2

Group revenue for the three months to 30 June was $2.76bn (£2.14bn/€2.54bn). This is up 8.6% from the $2.54bn posted by Sands in Q2 last year but short of consensus expectation. 

The good news for Sands is revenue was higher across each reporting segment and for both its operations in Macau and Singapore. Macau casinos drew the most revenue at $1.75bn, up 7.7% from $1.63bn last year.

Its Venetian property was the main source of revenue at $686m, ahead of the Londoner at $444m, Parisian $265m, Plaza and Four Seasons $250m and Sands Macau $205m. A further $30m came from ferry operations and other activities.

Macau visitor concerns for Sands 

While revenue climbed in Macau, Sands flagged call lower visitor numbers in the region on its post-report earnings. Quarter-on-quarter, visitor numbers in Macau were down two million, with the operator at a loss as to why this was.

“The visitation recovery rate has actually reduced,” Sands China CEO Grant Chum said. “So, that’s actually taking account of seasonality when you compare the visitation recovery versus second quarter of 2019, we’re about 79%.

“However, we were as high as 85% to 90% in the past six months in the past two quarters. So clearly, there has been, I think, more than just a seasonal slowdown. We don’t know exactly why.”

Group CEO Robert Goldstein also referenced concerns over visitors saying that, if the trend were to continue throughout the year, Macau could lose as many as eight million visitors a year.

However, longer term, he remains positive on growth potential in Macau. As for Sands and its own future in the region, the group is edging closer to completing work on its Londoner – with this work having impacted margin in Q2. 

“We remain confident in the future growth in Macao market,” Goldstein said. “I believe Macau market gross gain revenue will exceed $30 billion next year and continue to grow year after year.”

Singapore “getting better by the day”

As for operations in Singapore, revenue increased 9.8% to $1.02bn. All revenue came from the operator’s only property in the region: Marina Bay Sands.

When discussing Singapore on the earnings call, talk was much more positive. Goldstein went as far as to say that the market in general is powerful and getting better “by the day”. Looking ahead, Sands will soon be offering tower gaming at Marina Bay Sands for the first time. Such services are due to launch in Q3.

“In the past, Q2 is one of the weakest quarters in seasonality,” Goldstein said. “But still, what is happening in Singapore is almost unheard of in our industry. This market is so powerful and getting better by the day.”

Revenue growth offsets higher costs

As to where revenue came from, casino activity generated $2.04bn, a rise of 9.3.%. Revenue from rooms climbed 5.7% to $313m, food and beverage 3.5% to $148m, mall 1.2% to $174m and convention, retail and other 31.9% to $91m.

In terms of spending, operating costs were 8.2% higher at $2.17bn, with resort operations by far the main outgoing at $1.69bn. Sands also noted $95m in net finance expenses, which left $496m in pre-tax profit, an increase of 18.9%.

Sands paid $72m in income tax, while after taking off $71m in income from non-controlling interests, it was left with a net profit of $353m, up 13.1%.

Stronger results over H1

Although the results have been positive for the quarter, analyst expectations were higher than what was achieved after impressive results in Q1. This is evident in the H1 results where the growth numbers are substantially greater. Comparing H1 year-on-year, group revenue jumped 22.7% to $5.72bn. Revenue in Macau for the six-month period increased 22.6% to $3.57bn, while Singapore revenue was up by 22.6% to $2.17bn.

Total casino revenue in H1 was up 25.3% to $4.26bn, rooms revenue increased by 19.3% to $643m, food and beverage 11.6% to $298m, mall 4.2% to $348m and convention, retail and other 41.2% to $168m.

Operating expenses were 17.8% higher at $4.41bn while net finance costs were $482m. This resulted in a pre-tax profit of $1.10bn, up 79.1% year-on-year.

Sands paid $89m in tax and discounted $160m in income from non-controlling interests. As such, total net profit for the six-month period was $847m, a rise of 84.5%.

“Our financial and operating results for the second quarter of 2024 reflect growth in both Macao and Singapore compared to the second quarter of 2023,” Goldstein said. “We remain enthusiastic about our opportunities to deliver industry-leading growth in both markets in the years ahead, as we execute our substantial capital investment programmes in both Macao and Singapore.”

Thailand, Texas and New York in Sands’ sights?

This week Sands moved a step towards securing a lease for its proposed New York casino site at Nassau Coliseum on Long Island. It is one of 11 bidders in the mix for three downstate casino licences.

While Sands president and COO Patrick Dumont said the operator was “spending a lot of time” in New York and Texas – where Miriam Adelson is acquiring a majority stake in the Dallas Mavericks – he talked up Thailand’s integrated resorts plans in particular.

The Thai government is in the process of legalising casinos, and Dumont believes the market is a particularly interesting opportunity for Sands.

“The market there is very strong for different types of tourism,” he said. “And I think depending on the way it’s set up and the opportunity that’s there in terms of structure, it could be very interesting for us.

“[We’re] waiting and seeing what happens.”