Las Vegas Sands Continues To Expand In Macau, Slow Results From Singapore

by Trefis Team
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Even though Las Vegas Sands’ (NYSE:LVS) earnings fell short of consensus estimates due to soft performance in Singapore, the company continued to demonstrate its dominance in Macau. Macau is the world’s largest and most profitable gaming market, and the big gaming companies are trying to take advantage of this growth. [1] However, unlike its competitors, Las Vegas Sands did not experience a significant reduction in its growth in this region due to the recent slowdown in Chinese economy. We believe that the company has established a critical mass in the market in terms of its properties and resorts and that has helped it in taking market share from its competitors such as Wynn Resorts (NASDAQ:WYNN). In Q3 2012, the company’s share of gross gaming in Macau increased to 19.3% compared to 14.3% a year ago. [1]

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The Macau business constitutes roughly 55% to Las Vegas Sands’ value as per our estimates. However, the Macau gaming market is VIP centric. The majority of the revenue comes from high rollers or VIPs, accounting for about 70% of Macau’s total gaming revenue. [2] This section has suffered softness due to the slowdown in China’s growth as evident from the recently released Wynn Resorts’ earnings results. China’s economy grew by only 7.4% in Q3 2012, marking the seventh consecutive quarter of economic slowdown. [3] Nevertheless, Las Vegas Sands has expanded rapidly in Macau region and developed a portfolio of properties to control a significant portion of the market. Other competitors have lagged behind in this aspect. In fact, just since April 2012, the company has added 3,660 new hotel rooms and 2 new casinos. [1] The addition of ‘The Parisian’, approval for which is under way, will further strengthen Las Vegas Sands’ position in Macau.

Even though its Singapore results were soft, the company expects the situation to improve in the future. The idea is to get more gaming tourists to this destination and Las Vegas Sands will attempt to do so by focusing on getting tourists and visitors from nearby Asian countries. Asia is going to be at the core of company’s strategy. Las Vegas Sands is considering expanding to other regions such as Japan, Korea, Vietnam and Taiwan in Asia. [1] In addition to this, the company is also looking to expand to Spain, Canada, Brazil and Argentina. [1]

It appears that as the Las Vegas gaming market is becoming saturated and its stronghold at Macau has been built, the next big step for the company will be to expand in other countries. However, these are just initial considerations, and it will take time before any concrete plans are laid out.

Our price estimate for Las Vegas Sands stands at $50, implying a premium of roughly 10% to the market price.

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Notes:
  1. Las Vegas Sands’ Q3 2012 Earnings Transcript [] [] [] [] []
  2. The Top Stock In Gaming, Daily Finance, Aug 29 2012 []
  3. China Q3 growth slows, but worst may be over, The Economic Times, Oct 19 2012 []
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  • commented 1 years ago
  • tags: WYNN LVS MGM
  • The Economist has a long article on casinos in Maco (Sept 7th to 13th, 2013). Not very different from what I said earlier.
    Las Vegas Sands Logo
  • commented 1 years ago
  • tags: WYNN LVS MGM
  • Casinos' revenue in Macau is dictated by China's policy of allowing Mainlanders to come to Macau to gamble. Once China restricts the number and times of entries, Macau suffers. Singapore does not have that policy restraint.
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  • commented 2 years ago
  • tags: WYNN LVS MGM
  • Singapore is not Macau. Each place has its own characteristics. The devil is in the details. Sands is learning how to distinguish one market from another and to take advantage of the local characteristics.