February 18, 2010 / 11:15 AM / 9 years ago

Las Vegas Sands margins disappoint, shares down

LOS ANGELES (Reuters) - Las Vegas Sands Corp (LVS.N), the casino operator run by billionaire Sheldon Adelson, narrowed quarterly losses, but disappointed investors hoping for even better results from its Macau operations.

Its shares slid nearly 6 percent as the results met Wall Street expectations, but fell short of the most bullish forecasts, with weakness in Las Vegas offsetting strong gambling demand in the former Portuguese enclave in China.

“I think people were expecting a beat,” said Keybanc Capital analyst Dennis Forst.

Some analysts said the market had hoped for better from Macau, viewed by investors as the crown jewel in the company’s portfolio.

Soleil Securities said in a research note the company’s profit margins, particularly in Macau, were less than expected.

Gambling revenue in Macau, the only place in China were gambling is legal and the source of the majority of Sands’ operating income, has soared in recent months — jumping nearly 65 percent in January.

Sands, which sold a stake in its Macau operations in a public offering in November, posted a net loss of $113.9 million, or 17 cents a share, in the fourth quarter compared with a year-earlier loss of $136.5 million, or 27 cents a share.

Excluding items such as expenses to open a new resort in Singapore, Sands earned 3 cents a share, matching the average analyst forecast, as compiled by Thomson Reuters I/B/E/S.

Operating income at the company’s Venetian Macao resort nearly doubled to $119.7 million during the quarter, while operating income at the Sands Macao rose 13 percent to $43.9 million.

In Las Vegas, where citywide gambling revenue has begun to stabilize, but room rates are still heavily discounted, Sands had an operating loss of $15.7 million.

“In my view, Vegas underperformed and Macau outperformed,” Forst said.

Chairman and Chief Executive Adelson said Sands has done well in Macau — where earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) rose a “whopping” 48 percent in the fourth quarter — by focusing on mass gaming, hotel and retail businesses, while controlling costs.

Sands said $50 million of its Macau EBITDAR came from gambling “hold,” or luck on the part of its casinos.

The company acknowledged that results in Las Vegas have been hurt by lower room rates and less revenue from food and beverages. Competition continues to cap room rates, but Adelson said business is returning to Las Vegas, with group business up 20 percent in the first 40 days of 2010.

Overall net revenue for the quarter rose 17 percent to $1.28 billion, beating the $1.23 billion expected by analysts.

Sands owns the Palazzo and Venetian resorts on the Las Vegas Strip, two casinos in Macau and a casino in Pennsylvania. The Las Vegas-based company said its next gambling resort — located in the city-state of Singapore — will begin opening in late April.

Sands, which has come close to violating loan agreements and suspended construction on several projects, resumed work on additional Macau projects late last year.

The company said the first phase of these projects, located in an area of Macau known as the Cotai Strip, will open in June 2011, with the next phase following about six months later.

Sands officials discounted any impact on its Macau operations from monetary tightening by the Chinese government, saying that most of the company’s business in Macau is from mass market customers who do not rely on credit.

The company said it will report results for Hong Kong-listed Sands China Ltd (1928.HK) on March 1.

Sands shares, which hit an all-time low of $1.38 last March, fell to $16.44 after hours after closing down 0.6 percent at $17.46.

Reporting by Deena Beasley; Editing by Andre Grenon, Bernard Orr

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