3 biggest factors to blame for Marina Bay Sands' ugly 4Q13 earnings

Lower VIP volume is one.

According to Maybank Kim Eng, Marina Bay Sands reported a 14% YoY drop in 4Q13 EBITDA to USD258.8m due to a 17% YoY contraction (in USD terms) of 4Q VIP volume that was exacerbated by a low VIP hold rate of 1.92%.

Here's more:

MBS 4Q13 VIP volume fell 17% YoY. Recall that MBS 4Q12 VIP volume of USD16.5b was the highest in 2012 and was thus a very high base. Las Vegas Sands (LVS) attributed the lower VIP volume to high concentration of VIP volume in a few VIPs from 4Q12 that did not gamble in 4Q13. That said, we believe the lower VIP volume was due more to the weakening Chinese manufacturing segment and credit tightening in China.

MBS 4Q13 EBITDA margin lowest ever. MBS 4Q13 VIP GGR fell by a larger 25% YoY due to a lower VIP hold rate of 1.92% (4Q12: 2.14%), which was below the theoretical hold rate range of 2.7-3.0% and the second lowest in its history.

Consequently, its 4Q13 EBITDA margin fell 7ppts YoY to 39%, lowest in its history. For the record, LVS represented that the normalised 4Q13 EBITDA margin (assumes normal VIP hold rate) was ~47%.

MBS 4Q13 mass market GGR growth still tepid. MBS 4Q13 mass market table GGR grew only 4% YoY and 4Q13 slot GGR grew a mere 1% YoY. LVS represented that the growth was due to more foreign premium mass market gamblers.

That said, it also represented that the mass market GGR (table and slot) from local mass market gamblers was flattish. We believe the latter is due to wealth destruction from weakening property prices in Singapore.