Las Vegas Sands reported 4Q18 results yesterday and the result wasn’t what Wall Street had been hoping. Take the rapidly morphing reaction of Credit Suisse analyst Cameron McKnight. He went from “Good Read Thru” to “Disappointing 4Q Against Elevated 
Expectations” to “Not Lighting Cigars This Time.” At JP Morgan, analyst Joseph Greff shaved three dollars off his price target, lowering it to $57/share. Greff also cited Macao results that undershot expectations, as well as “softer than anticipated results in Singapore,” where Resorts World Sentosa is apparently clawing back some market share. Las Vegas was a saving grace “with attractive y/y growth in table drop, slot volume and room revenues.” While there were no progress reports on the new St. Regis suites in Macao, nor on conversion of Sands Cotai Central into The Londoner, the “continues to believe that its properties, and the Macau market overall, is capacity constrained (rooms/suites) on weekends and holidays and this investment should bear long term attractive returns.”
Management tried to manage expectations, saying of Macao “trees don’t grow to the sky forever” and minimizing the adoption of the VIP-room smoking ban as “a small speed bump.” It also took the view that the HKZM Bridge in China will create value over the long term, 
rather than immediately. Greff called Marina Bay Sands “a cash cow” but warned it “has hit a growth wall, and absent major investments in the property (renovating suites, adding rooms if/when they would be allowed), should see more modest performance in 2019.” Part of the problem was also VIP gross gaming revenue that fell 39%, coming in at $190 million. Revenues for Venelazzo were down 2%, albeit a still-impressive $424 million. Low table-game hold was blamed by Greff, although table wagers were up 38%.
“Disappointing Macau result, given ++ expectations in recent days (and some bullish street previews). VIP way below expectations, and daily [operating expenditures] appears to be up, driving margin compression. Vegas good,” was McKnight’s first 
reaction. Subsequently filtered through a series of e-mail blasts. “We don’t know if lower direct VIP hold was a result of the smoking ban and lower ‘time on device,’ which significantly impacts hold rates,” he wrote of Macao. McKnight noted steady mass-market revenue in Singapore, marred by a double-digit falloff in VIP revenue. Although the Las Vegas properties missed Wall Street revenue expectations by 2% they were up 12% q/q. The company was sufficiently awash in cash to buy back $430 million in stock.
* In another dispatch, McKnight looked at Las Vegas in general and projected 5%-10% room-revenue growth, thanks to a strong convention calendar January-June. “Labor market confidence remains at record levels,” he also remarked. Attendance at large 
conventions (10,000 souls-plus) is up 8% and the third quarter “is also shaping up well,” trending toward 4% growth. “Las Vegas convention attendance growth is highly correlated with corporate profit growth. With corporate profit growth accelerating through 2018 on economic growth and tax cuts, the strength we’re seeing in our forward convention tracker has a foundation. Clearly, convention business is important to Las Vegas and it is later cycle, given the considerable booking lead times, and correlation with corporate profits,” McKnight wrote. MGM Resorts International should see particular benefit from the convention-related business (10% higher revenue), given its strong mass-meeting focus. The quits rate — “an indication that the labor market is tight and that job market confidence is high” — grew in November, which bodes particularly well for locals casinos. On the cautionary side, existing-home sales were down 6.5% and consumer sentiment was off 5%, its lowest level since late 2016.
* McKnight also reports that Super Bowl betting is heavily lopsided, with four times as many bets being placed on the New England Patriots as on the Los Angeles Rams. Let’s face it: It’s long past time to hang the D-word (“dynasty”) on the Pats.
