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HomeNewsMacauDisruptions of Londoner Phase 2 revamp impact likely to peak in 3Q24: CLSA

Disruptions of Londoner Phase 2 revamp impact likely to peak in 3Q24: CLSA

CLSA notes that the disruptions from the revamp of Londoner Macao phase 2 will continue to ‘weigh on the results’, the impact is expected to peak in 3Q24.

According to the latest investment memo on Sands China’s 2Q24 results, the revamp of Londoner Phase 2 is causing the full closure of the Pacifica casino and a roughly 52 percent reduction in room keys at Sheraton.

This also contributes to the fact that Sands China’s 2Q24 hold-adjusted property EBITDA declined 12 percent quarter-over-quarter to $565 million, 2 percent below the forecast, says CLSA.

Analysts Jeffrey Kiang and Leo Pan further indicate that the Pacifica casino is fully closed in 3Q24, while the average number of keys will be further reduced to 1,300 in 3Q24 versus 2,700 keys on average in 2Q24.

According to guidance from Las Vegas Sands, the parent company of Sands China, the Sheraton hotel brand at The Londoner Macao casino complex will be replaced with the “Londoner Grand” accommodation branding by December this year. Meanwhile, the Cotai Arena, which has been undergoing renovation since January, is also scheduled to be operational by the end of the year.

Despite the low seasonality in the past quarter, Citigroup has a positive outlook over 3Q24 for Sands China, forecasting a 3 percent quarter-over-quarter increase in 3Q24 property EBITDA.

Analysts George Choi and Ryan Cheung indicate that Sands China’s 2024 property EBITDA might have disappointed some investors. However, Citigroup maintains a ‘Buy’ rating as Sands is seeing light at the end of the tunnel due to encouraging factors.

These include that 3Q is seasonally a stronger quarter than 2Q, the increase in the duty-free limit (from RMB5,000 – $690 to RMB12,000 – $1,650) for mainland Chinese visitors for shopping in Hong Kong and Macau became effective in early July, which should help boost Sands’ tenant retail sales.

Sands China’s net revenue grew 8 percent year-over-year to $1.75 billion in 2Q24, with adjusted property EBITDA increasing 4 percent. In this context, Citigroup notes that if they neutralize the $4 million negative impact from the unfavorable VIP hold, property EBITDA would have been $565 million.

On a luck-adjusted basis, the EBITDA margin declined only 0.8 basis point yearly to 32.1 percent last quarter. According to Citigroup’s calculations, 2024 luck-adjusted EBITDA implies a 75 percent EBITDA recovery versus 2019.

Premium Mass GGR improved 15 percent year-over-year to $675 million during the quarter. Base Mass GGR grew 19 percent year-over-year to $690 million. Total Mass table GGR increased 17 percent yearly to $1.37 billion, lower than Macau’s overall GGR growth at 24 percent year-over-year.

Viviana Chan
Viviana Chanhttps://agbrief.com/
Viviana Chan is an editor, interpreter, and journalist. With over a decade of experience, she writes in English, Chinese, and Portuguese. Viviana started her career in Macau-based newspapers, where she became passionate about the region's social, financial, and cultural development. Her writing focuses on the economy, emerging industries, gaming development, political affairs, and cross cultural-exchange in the business and cultural domains. She is avid for news and eager to discover and cover stories that generate public relevance.

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