Las Vegas Sands (NYSE:LVS) reported its Q4 2012 results last week and Macau once again was a big driver to growth. Unlike its competitors, Las Vegas Sands hasn’t experienced a slower growth in Macau in spite of a slowdown in the Chinese economy. We believe the company has established a critical mass in the market with its properties and resorts and that has helped it take market share away from its competitors such as Wynn Resorts (NASDAQ:WYNN).
Compared to the 19.3% in Q3 2012, Las Vegas Sands’ share of gross gaming in Macau increased to 21.1% in the fourth quarter.  Meanwhile, the results from the Las Vegas strip and Singapore were soft as expected with revenues and profits declining. While the Las Vegas market has become saturated and led to low profitability, Singapore continues to battle slow economic growth and tighter administrative restrictions on gambling.
Las Vegas Sands’ Integrated Properties In Macau Boosting Results
In Q4 2012, Las Vegas Sands saw the rolling volume grow by 37% compared to same quarter a year ago. Additionally, its mass market table win grew by more than 50%.  The company is focusing on integrating its various Macao properties including Sands Macao, Sands Cotai Central, Four Seasons and The Venetian. Another establishment, The Parisian, is expected to open by late 2015, as per management.
The Macau business constitutes roughly 55% of Las Vegas Sands’ value according to 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.  But this section has suffered losses due to the slowdown in China’s growth. Nevertheless, Las Vegas Sands has expanded rapidly in the Macau region and developed a portfolio of properties to control a significant portion of the market. Additionally, total gaming revenues in the region increased to $38 billion in 2012, registering annual growth of more than 13%.  Gaming revenues hit $3.5 billion in December, which was a record high for the year.  This indicates that market growth remains robust despite some economic headwinds.
Singapore Market Remains Soft
Singapore’s gaming and casino market is reeling under a slow economy and strict government control, with the former being the primary factor. The region’s economy has slowed in the past couple of quarters and the expectation is that 2013 will be slow too.  In addition to this, Singapore’s government has imposed certain restrictions to prevent the spread of organized crime and social ills that often plague the casino gaming cities.  We estimate that Singapore constitutes a little over 20% to Las Vegas Sands’ value.
Even though Las Vegas Sands’ Singapore results were soft yet again, the company expects to improve the situation by focusing on attracting tourists and visitors from nearby Asian countries. Asia is going to be at the core of company’s strategy. Las Vegas Sands is considering expansion to other regions such as Japan, Korea, Vietnam and Taiwan in Asia. In addition, the company is also looking to expand to Spain, Canada, Brazil and Argentina. 
Our price estimate for Las Vegas Sands stands at $48, implying a discount of roughly 10% to the market price.Notes:
- Las Vegas Sands’ Q3 & Q4 2012 Earnings Transcript [↩] [↩]
- Las Vegas Sands’ Q4 2012 Earnings Transcript [↩]
- The Top Stock In Gaming, Daily Finance, Aug 29 2012 [↩] [↩]
- Trend Analysis on Las Vegas Sands and MGM Resorts: Are Casinos a Good Gamble for 2013?, PR Newswire, Jan 21 2013 [↩]
- Singapore’s Casinos Lose Luster as Gaming Revenue Decline, Bloomberg, Nov 14 2012 [↩]
- Singapore Bets on Casino Revenues, The Wall Street Journal, Sept 5 2012 [↩]