by winston » Thu Jan 26, 2017 1:55 pm
<Research Report>JPM: SANDS CHINA LTD 4Q16 Results Miss Estimates; Industry Preferences GALAXY ENT, WYNN MACAU
JPMorgan, in its report, said the 4Q16 profit of SANDS CHINA LTD (01928.HK) was 5% below consensus, with adjusted property EBITDA falling 3% quarterly to US$610 million. The miss came from bigger-than-expected cannibalization, which offset the solid performance of The Parisian in 4Q.
Although management's tone was upbeat for both the short term and the long term, the knee-jerk reaction to the stock price is likely to be negative.
The broker continued to prefer GALAXY ENT (00027.HK) and WYNN MACAU (01128.HK) over Sands China. The broker rated Overweight on Sands China with target price of $40.
For positives, the broker said the performance of The Parisian is solid, posting $95 million EBITDA (above JPMorgan's estimates). It posted GGR market share of 5% and impressive 91% hotel occupancy during 4Q.
Retail rent was solid too at about $17 million in 4Q (or $68 million annualized), a tad higher than Sands Cotai Central.
The broker expected the performance of Sands China likely tp be strong during Lunar New Year. Also, the broker expected that the promotional environment remains rational, and there should be no over-incentivizing or over-promotion.
For negatives, the group's GGR rose 8% quarterly, trailing the industry's 10% growth, and the cannibalization is bigger than expected, as non-Parisian mass GGR actually fell 7% quarterly in 4Q, dragged down by Sands Cotai Central (SCC) in particular (down 14% quarterly).
Although it's too early to call a trend yet, this certainly seems the key area to monitor in coming quarters.
Weaker margin is also a negative too, due to higher-than-expected opex at Venetian and a weaker-than-expected top-line at SCC.
Source: AAStocks Financial News
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