Despite Gross Gaming Revenue (GGR) in Macau slightly surpassing forecasts for the second quarter of 2024, Las Vegas Sands (LVS) is expected to face challenges in market share and non-gaming contributions, brokerage Deutsche Bank noted.

These factors are projected to impact the company’s property EBITDAR for the quarter with LVS revising its Macau property EBITDAR estimate to $600 million, or $605 million including ferries and other operations, from the previous $621 million.

The brokerage also expects that given comparable developments and the cost escalation associated with these developments over the last several years, the construction budget for the Marina Bay Sands (MBS) new tower in Singapore will likely be above $4 billion.

Still, Deutsche Bank upped its EBITDAR forecast for MBS to $488 million from $454 million.

Despite these short-term challenges, analysts from Deutsche Bank remain optimistic about the company’s long-term growth prospects, citing continued organic growth in Macau and Singapore, the refurbishment of The Londoner, expansion at MBS, and other development opportunities.

Macau market dynamics

For the DB analysts, LVS’s market share in Macau has been slipping, which caused some concern among investors as despite a stabilizing GGR trajectory, the trend raises questions about the near-term growth for LVS.

The primary driver of this share loss is believed to be the rooms taken offline, with competition in the mass market also contributing.

‘As The Londoner Phase II progresses towards completion by the end of the year and into the first quarter of 2025, there is potential for an increase in market share, particularly in the mass market,’ reads the brokerage dispatch.

In 2019, LVS accounted for approximately 31 percent of the hotel rooms in Macau and had a mass gaming revenue share of about 32.8 percent.

Currently, LVS’s room footprint represents roughly 26 percent of the market, with a mass share of 30.6 percent as of the first quarter of 2024.

For the second quarter of 2024, LVS is expected to experience a year-over-year market share loss of about 300 basis points, though sequential market share is anticipated to remain consistent.

Through May, LVS’s GGR share was in the 23.5-24 percent range, similar to the 23.8 percent share in the first quarter of 2024, with Deutsche Bank estimations assuming a mass market share of approximately 28 percent, down 150 basis points quarter-over-quarter, and a VIP share of 9 percent, up 190 basis points quarter-over-quarter.

‘The flat sequential share is disappointing given the lower VIP hold in the first quarter of 2024, with the decline in mass share likely due to the additional room inventory being offline,’ the dispatch added.

Pipeline and expansion

While there are no expected changes to the development pipeline, the brokerage expects some disruption at The Londoner from its expansion throughout the second half of 2024.

Additionally, management is anticipated to provide a new estimate for the construction costs associated with the MBS expansion in Singapore.

Originally projected at approximately $3 billion, including around $900 million for the land premium paid several years ago, the budget is likely to exceed $4 billion due to comparable developments and cost escalations.

‘Notably, the new facility will likely include gaming operations, which were not part of the initial budget,’ DB analysts added.