Sands China profit hit by rising costs for Macau casino staff | South China Morning Post
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Sands China profit hit by rising costs for Macau casino staff

PUBLISHED : Friday, 18 July, 2014, 2:57am
UPDATED : Friday, 18 July, 2014, 2:57am

Macau casino operator Sands China fell 1.24 per cent after the firm reported second-quarter results below analysts' consensus estimates because of a bigger staff bonus package, underscoring the intense competition for talent in the gambling enclave.

Shares in several of its gaming peers also declined, with Wynn Macau dropping 2.52 per cent, followed by MGM China falling 2.03 per cent and Galaxy down 1.2 per cent at yesterday's trading close. The Hang Seng Index eased a mere 0.01 per cent.

Earnings before interest, taxes, depreciation and amortisation rose 22 per cent to US$800.6 million, below the US$856.5 million average estimates from six analysts compiled by Bloomberg. Net revenue was US$2.38 billion, up 15 per cent from a year ago, but this represented a 12 per cent drop quarter on quarter.

In a statement to the stock exchange, Sands' billionaire owner Sheldon Adelson said although it was partly due to a low hold rate in the premium mass sector, the US$29 million "14th month" staff bonus played a big factor.

"This set of results highlights the likelihood of further staff expense increase for casino operators due to the intense competition for labour ahead of Cotai casino openings," said Barclays analyst Phoebe Tse. "While we had factored in more significant increases starting 2015, expenses in 2014 are also increasing more than we expected."

Macau is facing an acute labour shortage across a variety of industries due to government-mandated quotas set aside for the local population. Competition to recruit and keep staff will intensify in the coming years as seven new casino-resort venues are under construction in Cotai.

More detailed second-quarter gaming data released yesterday by the Macau gaming regulatory body showed that VIP revenue industry wide was down 6 per cent year on year while mass tables were up by 32 per cent.

China Union Gaming analyst Grant Govertsen said: "We tend to think that World Cup had a much greater negative impact on mass market than VIP, which means that [Sands China] would be disproportionately impacted by the World Cup relative to its Macau peers. With the World Cup in the rearview, mass is likely to receive a quick boost in the back half of July."

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