Las Vegas Sands (NYSE:LVS) recently reported its 1Q 2013 earnings. The company attracted a record number of tourists and saw a 20% surge in revenues led by accelerated growth in Macau. While Sands China reported close to 40% growth in revenues for the first quarter, Singapore revenues declined despite a 40% increase in rolling chip volumes. Although Cotai Central was the new attraction in Macau, it was the company’s iconic property The Venetian Macau that continued to attract more tourists. Going forward, we expect the company to continue to do well at the Cotai strip. Given how quickly the Macau gaming market is growing, Las Vegas Sands plans to continue to expand in this region and will develop a new gaming zone of 40,000 sq. ft.
Once Again It Is All Macau
After a few quarters of slow growth resulting from a slowing Chinese economy, Macau’s gaming industry once again showed strength. The region’s gambling revenues surged 15% in the first quarter of 2013 led by the expansion of various casino operators.  Despite a slowdown in the Chinese economy last year, unlike its peers, Las Vegas Sands continued to do well in Macau. We believe that the company has established a critical mass in the market with its diverse properties and resorts, which is aiding its growth. The gains in its Macau operations in the first quarter were driven by mass table wins, which were up 63% compared to the previous year.  The Cotai strip has been the driving force behind the growth in Macau’s casino market. Going forward, Las Vegas Sands plans to expand its operations in Cotai, which will boost its casino revenues that is riding the boom of a burgeoning middle class and a growing number of high net worth individuals (HNIs) who love to gamble.
Singapore Revenues Down
Las Vegas Sands’ Singapore revenues declined by 6% in 1Q 2013.  The region’s economy has slowed in the past few quarters which has impacted its business.  Moreover, the government introduced strict measures during the past year to minimize social costs from the casinos’ success, and this could hamper its growth. The government has imposed an entry fee of $82 a day (S$100) for Singapore’s citizens and permanent residents to enter the casinos. Also, there is a monthly limit on casino visits for low-income earners, who generally play on mass-market tables. In light of these facts, we expect Singapore operations to continue to underperform.
We are currently in the process of updating our model for Las Vegas Sands in view of the recent earnings.
Our price estimate for Las Vegas Sands stands at $48, implying a discount of more than 20% to the market price.Notes: