Las Vegas Sands’ (NYSE:LVS) will report its 1Q 2013 earnings on May 1. Despite a slowdown in the Chinese economy last year, the company continued to do well in Macau, the world’s biggest casino market. Given the success of Las Vegas Sands’ integrated resorts in Macau and increased gaming revenues in China, we expect good results in the first quarter. However, the growth in the company’s Singapore operations is likely to be slow due to relatively strict government regulations and a decline in the number of foreign visitors.
Riding High On Macau
For the first three months of 2013, Macau’s gaming revenues surged 15% to $10 billion compared to the same period last year. In March alone, revenues were up 25% amounting to $4 billion.  While Macau’s strong growth will help the casino operators in the region, Las Vegas Sands in particular will be a key beneficiary as it has established a critical mass in the market with its diverse properties and resorts. This gives the company a competitive edge over the other players such as Wynn Resorts (NASDAQ:WYNN) and MGM Resorts International (NYSE:MGM).
The Macau gaming market is VIP-centric and this section has suffered some weakness due to the slowdown in China’s growth last year. However, the impact of the slowdown on Las Vegas Sands was muted. In the first quarter of this year, Macau’s gambling revenues surged as VIP gamblers returned to the market. 
Singapore Operations Slowing Down
Singapore is the second biggest market for Las Vegas Sands after Macau, and constitutes roughly 20% of the company’s value. However, Singapore’s government introduced strict measures during the past year to minimize the social costs from the casinos’ success, and this could hamper the market growth. The government has imposed an entry fee of $82 (S$100) a day to the casinos for citizens and permanent residents of Singapore. Also, there is a monthly limit on casino visits for low-income earners, who generally play on mass-market tables. A limit on such visits could hurt Las Vegas Sands’ casino business as mass-market table games contribute more than 30% to its Singapore revenues.
In addition to this, Singapore’s economy shrank 0.6% in Q1 2013 compared to the same period in 2012.  A slowdown in the economy is likely to have a mitigating impact on Las Vegas Sands’ operations in the region.
Our price estimate for Las Vegas Sands stands at $48, implying a discount of more than 10% to the market price.Notes:
- Macau up 15 per cent in first quarter, Intergame, Apr 26, 2013 [↩]
- Macau Casinos Revenue Roars As VIP Gamblers Return, Investors Business Daily, Mar 25, 2013 [↩]
- Singapore economy shows surprise 0.6% contraction due to manufacturing slump, Straits Times, Apr 12, 2013 [↩]