Sands China Q2 EBITDA Miss Raises Analyst Concerns

Sands China Ltd reported a weaker-than-expected second quarter, with analysts pointing to disappointing property EBITDA despite the company experiencing what was described as its worst-ever VIP gaming luck. Following the release of the results by parent company Las Vegas Sands Corp for the quarter ended June 30, JP Morgan said the market is likely to react negatively to the earnings.

EBITDA Declines Across the Business

Property EBITDA for the quarter dropped 24% year-on-year to US$430 million. JP Morgan described the period as particularly difficult, citing an unusual combination of unfavorable VIP luck, weak mass-market hold and challenging timing factors.

According to the brokerage, the reported EBITDA represented Sands China’s weakest quarterly performance since Macau’s post-pandemic tourism recovery began three years ago. Even after adjusting for an estimated US$87 million impact from exceptionally poor VIP luck, EBITDA would have reached US$517 million, still more than 5% below the firm’s expectations.

JP Morgan added that the quarter was difficult to assess because it included the largest VIP luck impact recorded in Las Vegas Sands’ 24-year history in Macau, alongside the lowest mass hold since the market reopened and reduced activity during the FIFA World Cup period.

Analysts Offer Mixed Outlook

Despite the disappointing figures, JP Morgan maintained its overweight rating on Sands China. The brokerage said its view was supported more by dividend yield and long-term positioning than by near-term earnings momentum.

Analysts highlighted the company's annual dividend of HKD1.00 per share, representing a yield of around 8%, while suggesting there could be further upside heading into the 2027 financial year.

JP Morgan also noted that investor attention would likely focus on whether the slowdown in premium demand is temporary or reflects a longer-term trend. During the quarter, premium mass revenue declined 11% compared with the previous quarter, while base mass revenue slipped 1%.

The brokerage further observed that Sands China’s gross gaming revenue decreased 15% quarter-on-quarter, significantly underperforming the wider Macau market, which declined by 7% over the same period. This reduced the company's market share by 210 basis points to 23.7%, the largest quarterly decline among Macau’s six casino operators.

Competition Continues to Pressure Margins

Morgan Stanley maintained a more cautious outlook, noting that Sands China has yet to consistently improve its EBITDA market share despite increasing reinvestment since June 2025. The brokerage reiterated its equal-weight rating, following its downgrade of both Sands China and the broader Macau gaming sector earlier this year.

The analysts argued that competitive pressure extends beyond the temporary impact of the World Cup, with operators facing tougher competition in the premium mass segment while receiving weaker support from base mass customers.

Morgan Stanley also reported that Sands China’s player reinvestment reached 26.6% of mass gaming revenue during the quarter, increasing both sequentially and year-on-year. At the same time, operating expenses rose 18% annually, raising concerns over industry profit margins during the second half of the year.

JP Morgan offered a more balanced interpretation, stating that operating costs and reinvestment remained relatively controlled after adjusting for hold rates, with expenses increasing only modestly compared with the previous quarter.

Attention Turns to the Second Half

Jefferies noted that Sands China is expected to publish its full first-half 2026 financial results and announce an interim dividend in mid-August.

The brokerage also highlighted management's expectation that operating expense growth should ease during the second half of the year as additional staffing costs and extended table operating hours begin to stabilize.

Management further confirmed that renovation work continues at The Venetian Macao, where all 2,900 hotel rooms are scheduled to be upgraded before the Chinese New Year in 2028. The company believes these improvements, combined with more moderate cost growth, could support EBITDA margin recovery as revenue continues to improve.