HONG KONG Macau casino Sands China Ltd, controlled by Las Vegas mogul Sheldon Adelson, posted weaker than-expected earnings in the second quarter due to a broader slowdown in the world's largest gambling destination and a drop in business from high roller VIPs.
Macau, the only place in China where casino gambling is legal, has for the past five years been a goldmine for Adelson's holding company, Las Vegas Sands, but a slowdown in the lucrative VIP segment and a diversion in betting due to the World Cup hit profits and revenues.
Gambling revenue from Macau's 35 casinos fell 3.7 percent in June, the first decline in more than four years.
Las Vegas Sands reported second-quarter revenue of $3.6 billion versus Thomson Reuters I/B/E/S estimate of $3.8 billion.
Management attributed the lackluster results due to a newly initiated bonus program for employees and a lower than expected win rate in the premium mass sector, made up of affluent gamblers who wager tens of thousands of yuan at a time.
Investors are likely to watch for similar initiatives from Wynn Macau, MGM China, Galaxy Entertainment, Melco Crown and SJM Holdings as all six licensed operators are being forced to increase staff benefits to retain workers ahead of a slew of new casino openings starting next year and a tight labor market.
Sands' model in Macau relies heavily on the mass and premium mass segments with its cavernous Venetian resort, more hotel rooms than the other gaming operators combined and retail malls, making it more defensive than rivals with 56 percent of its revenue base accruing from non-VIP customers.
Still the company's market share dropped slightly to 22.2 percent in the second quarter from 22.7 percent in the first quarter, the first time Sands' market share has dropped in eight quarters said Leon Liao, analyst at Jefferies in Hong Kong.
Adelson, speaking on a conference call on Wednesday, attributed a 6 percent drop in VIP revenues due to factors including tighter liquidity conditions in China and the lucrative junket system, a slowdown in the country's real estate market and caution due to an ongoing anti-corruption campaign.
He reiterated the temporary nature of any impact on Sands Macau operations ahead of the opening of the company's fifth resort, called the Parisian, which will include a replica of the Eiffel tower.
"I don't believe any of these unique competitive advantages can be matched by our competition even after the completion of the next wave of developments."
Sands' Hong Kong-listed shares were trading down 1 percent by midmorning on Thursday, lagging a 0.2 percent gain for the benchmark Hang Seng Index.
(Reporting Farah Master; Editing by Matt Driskill)