Global Presence Supports LVS $63 Fair Value And Growth Outlook

May 30th, 2012 by Trefis Team
+18.73%
Upside
46.56
Market
55.28
Trefis
LVS: Las Vegas Sands logo
LVS
Las Vegas Sands

Las Vegas Sands (NYSE:LVS) presently operates in Las Vegas, Macau and Singapore and is better positioned than its competitors due to its diversified geographical presence, which ensures a stable revenue stream and also acts as a shield in times of economic turmoil. To give an example, LVS reported a 48.7% jump in net revenues in 2008 when the recession had engulfed the world economy. Its arch rival Wynn Resorts (NASDAQ:WYNN) is primarily based in Las Vegas and Macau while MGM Resorts International (NYSE:MGM) is concentrated more in Las Vegas.

We have a $64 price estimate for Las Vegas Sands, implying a premium to the current market price.

See our full analysis for LVS

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Globally Diversified Operations

Macau

  • LVS has a significant presence in Macau and operates through the Venetian Macao, the Sands Macao and the Four Seasons Hotel. In April, it launched Sands Cotai Central – its fourth resort in Macau which is expected to complete in 2013. The resort will have 5,800 rooms and about 300,000 square feet of gaming space.
  • The company is strategically strengthening its position in the region and has witnessed its gross gaming market share grow from 15% in January 2011 to 19% in January 2012. [1] According to our analysis, LVS’ Macau operations comprise the most significant factor driving the company’s share price, making up 50% of its valuation.

Singapore

  • LVS, together with Resorts World Sentosa, enjoys duopoly in the Singapore gaming industry. The existing duopoly offers enormous growth potential to these gaming companies as it limits competition at least in the near future. Singapore enjoys the location advantage as it has approximately 5 billion population residing within a 5-hour flight distance. Moreover, gaming taxes in Singapore are comparatively lower compared to other regions globally and so it’s lucrative to operate in this region.
  • Since inception, Marina Bay Sands has posted solid revenues and helped LVS post strong top-line numbers. According to our analysis, LVS’ Singapore operations contribute approximately 30% to LVS’ present valuation.

Las Vegas

  • LVS operates the Venetian and Palazzo in Las Vegas and the Sands Bethlehem Resort in Pennsylvania. The Las Vegas gaming market has reached a saturation level and gaming companies are finding it hard to sustain margins. According to our analysis, LVS’ domestic operations comprise approximately 10% to its present valuation.

Vying for Expansion in Other Markets

According to reports, LVS is presently exploring opportunities specifically in India, Japan, Korea, Taiwan and Vietnam. At present, it is working on building Europa Vegas, an integrated resort in Spain, [2] which would give it access to European customers. We are optimistic about LVS expansion plans and its strong global presence should boost future growth.

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Notes:
  1. See: Las Vegas Sands’ CEO Discusses Q4 2011 Results, Seeking Alpha [↩]
  2. See: Las Vegas Sands plans €15bn gambling hub in Spain, The Telegraph [↩]