Morningstar | Slightly Weaker Mass Drop Offset by Solid VIP Volume in Sands China’s 1Q Result
Sands China’s first-quarter revenue and adjusted EBITDA were 27% and 28% of our full-year estimates. We do not plan to make changes to our 2019 estimates and maintain our fair value estimate at HKD 45 per share. Sands China’s parent company Las Vegas Sands, estimated the Macau market’s VIP gaming revenue declined 11% year-over-year in the quarter, versus a 13% decline by DICJ and 28% decline for Sands China. The group’s VIP rolling chip volume was up 1.2% year over year, which we think is decent considering the smoking ban was introduced in VIP areas this quarter. The reason was a result of the casino achieving a high ‘win rate’ in VIP and growth in the premium mass segment. Sands China’s non-VIP gaming revenue was up 13% year over year in the quarter, outperforming Las Vegas Sands’ estimated Macau market’s non-VIP gaming revenue growth of 9% but below DICJ’s reported 16%. This was helped by the hold rate being at the higher end of the normal range. In the first quarter, Sands China’s base mass win was USD 745 versus USD 725 in the prior quarter. The premium mass win was up 12% sequentially. Looking at the underlying demand in the mass market, Sands China’s mass drop was down 1%, which was a little weak. Management said the high-end premium mass was weak, in line with the VIP business. Given Sands China is the first to report and DICJ doesn’t publish Macau market’s VIP rolling chip volume and mass drop, we do not have the figures to make a comparison.The hold normalized adjusted property EBITDA margin increased 10 basis points to 36.5% year over year and 1.7% sequentially. The hold normalized adjusted property EBITDA was USD 835 million, 9% higher year over year and 6% higher sequentially. Net revenue was up 8% compared with the quarter a year ago and down 1% compared with the fourth quarter of 2018.
Management said the Parisian achieved a record quarter in terms of adjusted EBITDA, helped by the renovation of suites. We believe it was achieved by the casino profits in VIP and growth in the premium mass segment. Revenue at the property was up 26% year over year in the quarter and EBITDA was up 41%. The VIP win rate was 4.6%, versus 2.8% in the period a year ago. The rolling-chip volume was weak in the quarter, declining 15% year over the year and 19% sequentially. The mass volume increased only 5% year over year, but the mass hold rate improved to 23.1%, versus 20.2% in the first quarter of 2018. Management indicated there was huge growth in the premium mass segment, which we believe is the reason for the increase in the mass hold rate and record EBITDA. The renovation of Parisian suites and conversion of 600 smaller rooms into 300 larger ones of higher quality, was completed in the fourth quarter of 2018 to drive premium mass play.
Sands China and its subsidiaries are principally engaged in the operation of casino games of chance or games of other forms, the development and operation of integrated resorts which contain not only gaming areas but also meeting space, convention and exhibition halls, retail and dining areas and entertainment venues and other ancillary services including ferry operations and other related operations in the Macao Special Administrative Region of the People's Republic of China.
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