he Las Vegas Sands unit also said its first-half net profit more than quadrupled from a year earlier, driven by strong gambling revenue growth in Macau and higher margins at its casinos.
The project delay and the strong result highlight both the growing importance of the Macau market to parent company Las Vegas Sands, which said last month it had swung to a profit in the second quarter largely thanks to strong growth in the Chinese territory, and also the challenges the casino operator faces doing business there.
Sands China, which listed in Hong Kong in November, said its net profit for the six months ended June 30 was us$ 250.5 million, up from us$ 58.3 million a year earlier. Revenue rose 32% to us$ 1.98 billion from us$ 1.50 billion.
The company's focus on driving mass market business, which is more profitable than VIP business, and its fierce expansion strategy have won praise from analysts, who generally consider it a solid long-term investment.
However, "the near-term share price performance is contingent on several factors -- the resolution of labor issues for its Lot 5&6 project, timeline for the disposal of the Four Seasons apartment, and hiring of a new CEO for the company," wrote JP Morgan analyst Kenneth Fong in a report this week.
Sands China and rival Galaxy Entertainment Group, hamstrung by the Macau government's restrictions on foreign labor, are struggling to hire necessary construction workers to complete their enormous projects in the territory's lucrative Cotai area, already home to Sands' flagship Venetian casino resort. Sands China Wednesday said it expects to open the first phase of its Cotai project, also known as sites 5 and 6, by the fourth quarter of 2011, after earlier this month reiterating a third quarter target.
"Due to matters beyond the company's control, we have faced challenges acquiring the construction labor that we need quickly enough to be able to meet our original development and opening deadlines," the company said in a statement, adding it will take about 16 months to complete the first phase of the project once the company has "sufficient labor to ramp up our construction activity to requisite levels." Sands China also said the board had approved an extra us$ 100 million for the project.
Given acting CEO Mike Leven just two weeks ago said the company has around 1,300 construction workers on site--half of what was needed at that time--and nowhere near the 10,000 to 11,000 workers required at the peak of construction, even a fourth quarter opening looks quite optimistic.
But Sands' expansion is "essential for Cotai," wrote Bank of America Merrill Lynch analyst Billy Ng, adding that the additional 6,000 hotel rooms the project will bring "can increase the supply of the lower price point hotel rooms and will help broaden the customer base to drive more traffic to casinos and retail shops in Cotai."
The company has also so far failed to gain approval from the local government to sell its Four Seasons apartments, which analysts say could be worth over us$ 1 billion.
Negotiating these hurdles is made more difficult by the fact that the company is without a permanent chief executive. Sands China last month dismissed Steve Jacobs, the CEO who presided over its record-breaking second quarter results, amid strains with chairman Sheldon Adelson and has since named joint chief operating officers with very limited experience doing business in Macau.
Leven said earlier this month that Sands China hopes to have its new chief executive, preferably an Asian, in place by the end of 2010. The company wants someone with Asia experience who is "culturally sensitive," he said, adding that the company wants to build a better relationship with the people and government of Macau. The Las Vegas Sands unit's aggressive expansion plans have appeared to conflict with the government's calls for sustainable development.
Separately, the company said that Luis Nuno Mesquita de Melo has been replaced by Anne Maree Salt as the Joint Company Secretary of the company, effective immediately.