LVS modest margin declines likely to accelerate: DB

Las Vegas Sands 15Q3 results beat expectations due to continued cost cutting in Macau and a surprising upside in Singapore, but recent modest margin declines are likely to accelerate, Deutsche Bank said in a note.

LVS’ adjusted net income decreased to $529.8 million, or $0.66 per diluted share, compared to $675.7 million, or $0.84 per diluted share, in the third quarter of 2014. That beat estimates compiled by Capital IQ by three cents.    

Along with an increased dividend DB considers the quarter to be better than feared on most accounts. 

“That being said, we believe the recent modest margin declines are likely to accelerate.”

“We see slippage in Macau retail trends and we would anticipate greater declines in the near term as turnover rent comps stiffen.”

DB added that while LVS remains the safer play on the potential Macau recovery given its growing dividend and balance sheet, ”we believe new supply is likely to have a more profound impact on LVS results going forward, relative to peers.”

“Accordingly, we remain on the sidelines, given what we expect will be accelerating margin erosion and share loss in Macau.”