Las Vegas Sands Brings Paris To Macau Amid Strong Outlook For Casinos

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Las Vegas Sands

Las Vegas Sands (NYSE:LVS) recently unveiled plans for its new resort in the Macau region. The $3 billion project, known as The Parisian, will be a replica of the Eiffel Tower. [1] A similar type of a resort is already present in the Las Vegas Strip, but this will be something new for the Macau region. Although the current growth of the Chinese economy has led to a decline in the revenues for Macau’s casinos, Las Vegas Sands has managed to register growth. With the further expansion in the region, the company is eying a significant increase in its revenues in the long term. According to our estimates, there could be 5% to 10% upside in our price estimate for Las Vegas Sands if we assume that the new resort will be completely operational and successful.

See our complete analysis for Las Vegas Sands

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Strong Performance In Macau Justifies Expansion

The company has a very strong presence in the Macau gaming industry. In the second quarter of 2012, while the economic slowdown in China resulted in a slow growth in the overall Macau gaming industry, Las Vegas Sands reported an increase in the VIP market turnover (36.3%), mass market turnover (20.9%) and the slot handle (72.5%) compared to the same quarter last year. [2] The growth in the turnover for Las Vegas Sands was significantly larger than the growth in the overall industry turnover. [2]

At the end of Q2 2012, Las Vegas Sands had a total of around 7,000 rooms across The Venetian Macao, Four Seasons Hotel Macau, Sands Cotai Central and Sands Macao. [2] With the completion of the Sands Cotai Central, Las Vegas Sands will have around 25 million sq. ft. of resort area with over 9,000 rooms, 1,300 table games and 6,000 slot machines. [2] Additionally, the company is planning to add 3,000 rooms to its new resort, The Parisian. However, the figures around the addition of slots and table games for the Parisian are not clear at the moment. [1]

The aforementioned data clearly indicates that Macau is a very important market for Las Vegas Sands and clearly justifies its decision to expand further into the market.

Impact On Las Vegas Sands

According to our estimates, Las Vegas Sands’ Macau operations constitute about 60% of the company’s value. Any significant improvement in the revenues of this region will result in a substantial upside to the stock.

The company reported that it is planning to finance the project $1.5billion in debt and $1billion in cash. [3] Assuming that the resort will be completely operational by the year 2016 and the number of table and the slot games will be similar to Las Vegas Sands’ other resorts in the region. There can be an upside of 5% to 10% to our estimate for the company based on the increased revenues from the increased number of rooms as well as table and slot games. You can modify our forecast above to see how change in VIP table game wagers can impact Las Vegas Sands’ price estimate.

Our price estimate for Las Vegas Sands Stands at $50, implying a premium of about 8% to the market price.

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  1. Sands to build Parisian-themed Macau casino-resort, NBC News, Sept 24 2012 [] []
  2. Las Vegas Sands’ SEC filings [] [] [] []
  3. Las Vegas Sands unveils plans for The Parisian resort in Macau, Las Vegas Review-Journal, Sept 20 2012 []