Costs chip away at earnings for Las Vegas Sands

Opening a $1.9 billion Strip resort and developing more than $17 billion worth of hotel-casinos in Macau, Singapore and Pennsylvania ate away at revenues collected by Las Vegas Sands Corp. in the recently completed fourth quarter.

The casino operator's net income fell 65 percent compared to a year ago due to increases in operating costs for the company's growing infrastructure and an increase of $46.7 million in other expenses. The run-up to the Dec. 30 opening of the Palazzo cost Las Vegas Sands $19.5 million in preopening expenses in the quarter.

But company executives were upbeat Monday while announcing results for the three-month period ended Dec. 31.

The quarter marked the first full quarter of operations of the $2.4 billion Venetian Macau, which opened Aug. 28. The 3,000-room Cotai Strip resort contributed more than $500 million of revenue to the company's overall revenue figure of $1.1 billion in the quarter, which was a 65 percent increase compared with $666.5 million a year ago.

"Our efforts to transform Macau into Asia's premier business and leisure destination continue to bear fruit," Las Vegas Sands President Bill Weidner said in a statement.

Since its opening, company executives said The Venetian Macau has entertained more than 9 million hotel, casino, dining, convention and retail guests.

"More than 70 percent of visitors to Macau in the quarter visited The Venetian Macau and the Cotai Strip," Weidner said.

Las Vegas Sands' overall quarterly revenues translated into a net income of $39.8 million, or 11 cents per share, compared with $113.6 million, or 32 cents a share, a year ago. Analysts polled by Thomson Financial expected Las Vegas Sands to earn 35 cents per share. The company said the $73.8 million decrease in net income was swallowed up by expenses and operating costs.

Weidner said the fourth-quarter results reflected "the steady execution of our global growth strategy."

In addition to the 3,068-room Palazzo, which celebrated a grand opening in the middle of January, Las Vegas Sands had total capital expenditures of $1.07 billion in the quarter, which included $460.7 million in development activities on six sites along the Cotai Strip of Macau, which will include almost a dozen luxury hotel and casino developments.

"We realize that we are only in the early stages of fulfilling our promise to Macau," Weidner said. "We have much work ahead of us as we continue to partner with our constituencies in Macau, Hong Kong and the wider region to realize the vision of transforming Macau into Asia's premier business and leisure destination."

Meanwhile, shares of Las Vegas Sands fell Monday when gaming analyst Dennis Forst of KeyBanc Capital Markets predicted the casino operator's fourth-quarter results would not meet Wall Street's expectations. The company announced earnings after the markets ended trading.

Las Vegas Sands closed on the New York Stock Exchange at $81.45, down $6.40, or 7.29 percent.

Forst noted that the company's stock has climbed 18 percent the past two weeks.

"We are concerned that a perceived shortfall will bring about temporary weakness in these volatile shares," Forst said in an investors note.

Deutsche Bank gaming analyst Bill Lerner said investors have battered shares of Las Vegas Sands over the last few months over a number of concerns, particularly the performance of the Macau gaming market. Last week, Lerner said press reports out of China showed January's gaming win in Macau had climbed 67 percent from a year ago.

"The market has been concerned about poor hold percentage at Venetian Las Vegas, (but) we suspect Las Vegas Sands played in the normal range," Lerner said in a note to investors. "We believe Venetian Macau is ramping well and better mass market volume could provide upside to our margin estimate. However, it is our view that Venetian is cannibalizing Sands (Macau) at a greater magnitude than anticipated."

In its earnings report, the company said revenue at the Sands Macau was $258.2 million in the quarter, a nearly 17 percent decrease compared with $345.9 million for the same quarter a year ago.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.