The fourth quarter of 2016 was the first quarter since the second quarter of 2014 that Macau’s gaming market grew at all. And the signs of life have given new hope to gaming investors with exposure to the world’s biggest gaming market.

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But Las Vegas Sands Corp. (NYSE: LVS) may not have had as strong a quarter as competitors like Melco Crown Entertainment Ltd (NASDAQ: MPEL) and Wynn Resorts, Limited (NASDAQ: WYNN). We’ll have to wait until the latter two report earnings to see how market share is trending, but Las Vegas Sands left a lot to be desired from a growth perspective.

The Parisian in Macau. Image source: Las Vegas Sands.

What earnings looked like in Q4

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Overall, net revenue was up 7.4% in the fourth quarter, to $3.08 billion, and net income rose 5.6%, to $607 million, or $0.64 per share. Good luck helped the quarter, and if casinos would have won the amount that management normally expects to win, earnings would have been $0.58 per share.

Growth for the business overall isn’t surprising because Las Vegas Sands opened The Parisian late in the third quarter, so the year-over-year comparisons include that resort. But when you dig into the resort level numbers, you can see what’s going on, and a predictable decline in Las Vegas Sands’ business.

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What Macau told us last quarter

I think it’s important to compare Las Vegas Sands’ performance to the market overall — as I would with any company. In Macau, gaming revenue grew 10.2% in the fourth quarter, so that’s the bar to which we should compare the company’s results.

The Venetian saw revenues decline 7.1%, to $707 million, last quarter and adjusted property earnings before interest, taxes, depreciation, and amortization (EBITDA) was down 12.1%, to $262 million. Most concerning is that rolling chip volume, a measure of VIP play, was down 13.9%, and mass-market play was down 1.6% in the quarter.

Sands Cotai Central saw revenue decline 12.3%, to Tempobet $444 million, and EBITDA was down 17.5%, to $132 million. Sands Macau revenue was down 21.5%, to $161 million, and EBITDA fell 7.8%, to $47 million. The one bright spot was 3.2% growth in revenue at Four Seasons Macau, to $163 million, and a 1.5% increase in EBITDA, to $67 million.

Offsetting the decline at existing resorts was the new Parisian Macau, which generated $344 million in revenue and $95 million in EBITDA. But here’s where we need to take Las Vegas Sands’ presence in Macau as a whole and compare it to the broader market.

Las Vegas Sands is losing high rollers to competitors

What caught my eye — rolling chip volume was down $3,633 million in the quarter at existing resorts, offset by $3,313 million in volume at The Parisian. In other words, VIP play was down at Las Vegas Sands, overall.

This is notable because MacauVIP play was up 25.3% in the fourth quarter, so this should be an area of growth. It’s clear that, if Las Vegas Sands isn’t serving those customers, they’re likely going to Wynn Palace or Melco Crown’s properties. This is notable because VIP baccarat play alone is 55.2% of the gaming market overall.

The bright spot for Las Vegas Sands

Macau might be a weak spot, but Marina Bay Sands in Singapore continues to be a point of strength. Revenue was up 2.8% from a year ago, to $723 million, and EBITDA jumped 8%, to $366 million. That’s an incredible EBITDA margin of 50.6%.

Las Vegas revenue was also up 3%, to $412 million, and EBITDA was up 14.4%, to $111 million.

While Macau has been a struggle, Las Vegas Sands, in particular, has been a strength, and Marina Bay Sands is a cash-flow machine. In the coming year, as more resorts open on Cotai, and Las Vegas Sands likely loses more market share, these stalwarts will be an important part of the business and provide the cash needed to keep the quarterly dividend of $0.72 flowing to investors.

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Travis Hoium owns shares of Wynn Resorts. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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