Sands China gambles on room revamp to revive flagging profits

The Macao casino operator has reported a drop in quarterly profit but is banking on demand for its refurbished rooms during May’s Golden Week holidays

Key Takeaways:

• Sands China’s first-quarter profit fell 32% to $202 million, with adjusted property EBITDA dropping 12% to $540 million
• After a luxury upgrade, rooms and leisure facilities at its Londoner Macao resort are now fully open for business

By Lee Shih Ta

Investors are placing their bets on whether a leading Macao casino operator can revive its earnings after a major room revamp.

Share prices across the casino sector have been under pressure all year, amid a slowdown in Macao tourism and worries about trade tensions between China and the United States,

Against that backdrop, Sands China Ltd. (1928.HK), part of a US-owned casino and hotel group, has reported lower revenues and a sharp drop in profit for the first quarter. The company blamed the lackluster figures on a subdued market and renovations at its Londoner Macao resort.

The refurbished property is now ready to welcome tourists for the May holiday season, with investors keen to see whether the gamble on lavish new rooms and entertainment facilities at the British-themed resort will ultimately pay off.

Meanwhile, revenue for the first three months fell 5.7% to $1.7 billion from the year-earlier quarter, while profit plunged 32% to $202 million and adjusted property EBITDA dropped 12% to $540 million. The performance was also down on the preceding quarter, when year-on-year revenue had fallen 5% and profit tumbled 17.7%. The first-quarter profit is still only about 36% of the $557 million earned in the same period of 2019, before the Covid pandemic.

Shares in Sands China eased 0.2% to HK$13.6 after the earnings release, gaining no relief from a drop of nearly 35% for the year to date. That share slide is bigger than falls at other operators: a drop of 3.2% for Wynn Macau (1128.HK), 14.4% for Galaxy Entertainment (0027.HK), 15.18% for Melco International (0200.HK), and 18.22% for SJM Holdings (0880.HK). MGM China (2282.HK), meanwhile, has managed a modest share rise of 1.52% this year.

Revenue fell across the Sands China Macao resorts, except for The Plaza Macao and Four Seasons Hotel Macao. The Venetian Macao, The Londoner Macao and The Parisian Macao suffered year-on-year revenue declines of 17.3%, 5.9% and 1.3% respectively. Non-gaming revenues – from rooms, food outlets, shopping and convention services – rose 7.5% at the Venetian Macao but fell 4.1% and 5.2% at the two other properties.

A game changer?

Aside from disruptive renovations at The Londoner, the company noted that an increase in day-trip visitors from Guangdong Province, due to easier access to visas, was not translating into higher gaming budgets or overnight stays. For example, The Venetian Macao is popular with Chinese visitors, but they are careful about the amount they spend there.

However, Sands China confirmed that all the newly renovated rooms in its luxurious Londoner Grand complex, within the Londoner resort, were now fully open to tourists as the Labor Day holidays get underway. Targeting high rollers in its main gaming rooms, the Londoner Grand offers 1,500 lavishly appointed suites and 905 standard rooms, compared with more than 4,000 rooms before the revamp. The launch of the premium suites could be a game changer for the business, although it will take time for the investment to pay off, according to CEO Grant Chum.

Although Macao tourist numbers are rising, gaming revenue is barely budging. Macao welcomed 3.06 million visitors in March, up 12.8% from a year earlier, but gambling revenue for the same period came in at 19.66 billion patacas, down 0.4% from February and up only 0.8% from the same month of 2024, according to Macao’s Statistics and Census Service. Macao’s Secretary for Economy and Finance, Tai Kin Ip, recently warned that fiscal revenue this year may lag forecasts, as Macao industries face tougher international competition and economic uncertainties, including the risk of an escalating trade war between the United States and China.

What are the odds?

In a worst-case scenario, China could cancel the gaming licenses of the three U.S.-controlled casino operators in Macao or not renew the permits when they expire in 2032, according to a report from ratings agency Fitch.

A more plausible risk, Fitch noted, is that the firms could be forced to sell their stakes in Macao casinos if relations deteriorate, although the likelihood of either scenario was rated as very low.

All three operators that are majority-owned by U.S. gaming brands are highly dependent on the Macao market. Sands China got 63% of its revenue from Macao business last year, while Wynn relied on the territory for 52% and MGM 23%. Together, the three contribute more than half of Macao’s gaming revenue and gaming revenue deliver 80% of its tax revenue.

Addressing concerns, Las Vegas Sands CEO Robert Goldstein said the geopolitical risks arising from the tariff dispute would have a limited impact on Macao operations.

“We’re not operating in Mainland China. We’re in Macao. I think that’s different,” he said. “Despite current headwinds, we remain committed to long-term investments in Macao to enhance its appeal as a world-class business and leisure destination, laying a solid foundation for future growth.”

The group also vowed to keep buying Sands China shares, restating a pledge to raise its controlling stake to 74.9%.

As for its price-to-earnings (P/E) ratio, Sands China trades at 14 times, higher than Wynn Macao’s 9.1 times, MGM’s 8.3 times, and similar to Galaxy Entertainment’s 14.1 times, indicating a degree of investor confidence in its prospects. While macro challenges persist, Sands China may be poised to turn a corner, helped by policies to stimulate consumption and by its investment in opulence.

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