A maiden HK$4.67 billion dividend payout by Sands China may point the way to more distributions by other cashed-up Macau casino companies, say analysts.
Sands China, 70.3 per cent owned by gaming magnate Sheldon Adelson's Las Vegas Sands, said yesterday it would pay a HK 58 cents-per-share interim dividend to shareholders of record as of February 20.
The payout makes Sands China the third of the six Hong Kong-listed Macau casino operators, after SJM and Wynn Macau, to pay a dividend, and analysts expect burgeoning cash flows at Galaxy Entertainment may allow that firm to follow.
'Benefiting from the robust gaming demand from mainland China, Macau's gaming operators have generated superior investment returns from their casinos, and this has enabled them to pay down most of their debts over the past few years,' Goldman Sachs analysts Simon Cheung and Janet Lu wrote this week in a research note.
'The potential for dividend distribution has emerged as a new theme for Macau's gaming industry,' they said, projecting that four of the six casino operators would see their cash exceed debts by year end (see chart). Sands China, whose debt is still expected to exceed cash by US$1.9 billion at the end of this year, according to Goldman, said its board of directors 'has determined that it has sufficient reserves, after the payment of this interim dividend, to finance its operations and the expansion of its business, including the development of additional integrated resorts in Macau,' according to a stock exchange announcement.
The company is building a US$4 billion, 6,000-room casino resort on the Cotai strip that it expects to open in phases starting this spring. It has also received a land grant for what it calls 'Parcel 3', a site adjacent to its Venetian and Four Seasons casino complexes on Cotai. The land grant requires work on Parcel 3 to be completed by April of next year.
Despite the midday announcement of the dividend, shares in Sands China closed down 2.23 per cent yesterday at HK$26.25.
Based on its shareholding in Sands China, indebted parent company Las Vegas Sands will receive a dividend payment of around HK$3.3 billion for the interim period.