Las Vegas Sands (NYSE:LVS) recently reported its Q3 2013 earnings. The company continued to attract more tourists and saw a 32% jump in revenues to $3.57 billion led by accelerated growth in Macau.  The surprise growth in Singapore’s economy this year also helped the company. Revenues from Marina Bay Sands were up 24% while EBITDA was up 43%. The star performer was Sands Cotai Central (SCC) in Macao, which saw solid growth across divisions, resulting in 150% growth in revenues and more than 300% growth in EBITDA.  SCC is all set to be the third property for LVS to be in the league of more than $1 billion annual EBITDA. LVS’ mass table win in Macau for the quarter was up 61% to record $1.06 billion in a market that grew approximately 38% in the quarter.  Going forward, mass-market gaming will be the key driver for future growth in Macau as it yields significantly higher margins as compared to VIP gaming (See – Mass Market Gaming Will Bring Growth For Las Vegas Sands).
We currently have $59 price estimate for Las Vegas Sands, which we will soon update based on the third quarter earnings announcement.
Macau Shines Bright
LVS has been showing healthy growth in its Macau operations for some time now. The company has four properties in the region and all of them performed well in the third quarter, especially SCC, which saw 164% jump in Non-Rolling Chip drop. Mass win per table per day also increased 118% year-over-year reaching $12,813 per day.  The property was operational only in April last year and the company’s management stated that the story at SCC is just beginning and there is material potential growth for the property.  LVS is also coming up with another property – The Parisian in late 2015 – which will add to its offerings in the region.
The company has been outperforming Macau’s overall growth. Macau’s gaming revenues grew by close to 20% in the third quarter while Sands China saw a 43% jump in revenues (Read – Continued Growth In Macau). LVS has been able to establish a critical mass with its diverse portfolio of properties in the region. Macau now accounts for close to two-thirds of LVS’ revenues. According to our estimates, Macau casinos and hotels alone contribute close to 60% to the company’s stock value.
Las Vegas Sands was quick to realize the potential of mass market gaming in China and has been aggressive on capturing that space. With more than 200 mass market tables, the company developed SCC in Cotai, which is becoming a hot destination in Macau. While other casino operators are also coming up with new properties in the region, LVS and SJM were first to be operational and are benefiting from the same. Macau is the only place in China where gambling is legal. China itself has been seeing growth in a number of HNIs and only a small portion of them visit Macau for gambling.  As China continues to grow, more people will visit Macau for gaming activities and LVS will continue to benefit from the rising demand.
Singapore Operations Surge
The company’s Singapore operations performed well as the country’s macroeconomic situation has been favorable this year. While Singapore’s GDP contracted 1% in the third quarter, it is up 5% on a yearly basis.  The hotel business in Singapore has been fruitful for the company. The occupancy level continues to be very high in the third quarter at around 99.8%. The average daily rate (ADR) increased by 11% to $401, the highest for any LVS property.  On the other hand, Singapore’s casino revenues also jumped by 33% to $628 million driven by higher Rolling Chip volume. Rolling Chip win percentage also increased to 2.85% compared to 1.79% during the same period previous year. 
Singapore’s government has imposed certain restrictions to prevent the spread of organized crime and social ills that often plague the casino gaming cities. However, that has been more than offset by increased visitation from non-Singaporeans including Indonesians, Malaysians and Chinese. As per the latest data available, growth in the number of international visitors in Singapore during the January-July 2013 period was 8%.  The company has been aggressive in attracting foreign visitors and will continue to benefit from the same.Notes:
- LVS’ SEC Filings [↩] [↩] [↩] [↩] [↩]
- Las Vegas Sands Management Discusses Q3 2013 Results – Earnings Call Transcript, Seeking Alpha, Oct 18, 2013 [↩] [↩]
- Chinese High Net Worth Individuals Shift Wealth Management Focus from Growing to Preserving Assets; Overseas Diversification on the Rise, Finds New China Private Wealth Report, Bain & Company, May 7, 2013 [↩]
- Singapore GDP Contracts 1.0% In Q3, RTT News, Oct 13, 2013 [↩]
- International Visitor Arrivals Statistics, Singapore Tourism Board, Sep 24, 2013 [↩]