A contracting Singapore economy, along with a lower VIP win percentage and a rising greenback, took a toll on Marina Bay Sands' earnings in the second quarter.
MBS posted a sharp 11.4 per cent drop in revenues to US$713 million (S$974 million) and a 13 per cent plunge in Ebitda - a measure of profit before tax, interest and other items - to US$363.3 million, as mass market gaming growth was offset by the drop in VIP win percentage and a stronger US dollar.
MBS' win percentage, or hold rate - the portion the casino retains on a $1 bet - was 2.78 per cent for the quarter, which means that for every $1 wagered by VIP gamblers, MBS made 2.78 cents. That compared with 3.45 per cent achieved in the same quarter a year earlier.
MBS' revenue per available room (RevPAR) and average daily rate (ADR) were undermined by a strengthening greenback against the Singdollar amid expectations the US central bank will raise its key interest rate this year. ADR fell to US$377 from US$409 a year earlier, while hotel occupancy dropped to 95.9 per cent from 99.1 per cent, resulting in RevPAR falling to US$361 from US$405 a year ago.
The slowing economy weighed on MBS' revenues. "While the company's Singapore operations have been doing well in the past few quarters, it could be a tough June quarter, given an unexpected sharp contraction in the economy," according to a contributor to Forbes' website. Singapore's economic output contracted by 4.6 per cent in the second quarter on a seasonally adjusted, quarter-on-quarter annualised basis, the Ministry of Trade and Industry said last week.
For the quarter, MBS' casino revenues slipped 12.5 per cent to US$565.7 million, hotel room revenue fell 11.2 per cent to US$82.7 million, and food and beverage revenue was down 11.6 per cent to US$41.3 million. Convention, retail and other revenues slipped 11.3 per cent to US$24.4 million.
But analysts say there are signs of stabilisation in MBS' second-quarter earnings, as its VIP volume eased by a narrower percentage than Macau's and a tight credit policy brought its bad debts down to a four-year low of US$20 million.
Maybank Kim Eng cited a 6 per cent quarter-on-quarter drop in MBS' VIP volume compared with Macau's 12 per cent quarter-on-quarter plunge.
"Mass-market gross gaming revenues were admirably flat quarter on quarter" despite Asian currencies slipping to new lows against the Singdollar, it said.
Meanwhile, MBS' parent Las Vegas Sands (LVS) missed analysts' estimates for its second-quarter earnings, as a corruption crackdown and the slowing Chinese economy continue to cut into business in Macau. LVS reported a profit of US$469.2 million, down 30 per cent from US$671.4 million a year earlier. Revenue fell 19 per cent to US$2.92 billion.
A graft crackdown has curtailed the number of high rollers visiting Macau and Singapore, contributing to gaming revenue declines. In the long run, analysts say LVS will have to generate more mass-market business as it transitions away from relying on VIP gaming.