Las Vegas Sands (NYSE:LVS) will report its Q2 2013 earnings on July 24th. Macau gaming revenues continue to grow impressively this year as Asia’s gambling hub attracted more visitors from Mainland China and the rest of Asia. We expect the company to post good results in the second quarter on the back of sustained growth in Macau’s VIP gaming and a 33% surge in mass-market gaming. 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. It will be interesting to see how Cotai operations unfold in this quarter given that the resort was operational in April last year.
Strong Growth In Macau
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Macau’s gaming revenues jumped 16% to $10.78 billion in Q2 2013 led by sustained growth in VIP gaming, which increased by 11% to $7.26 billion. Mass-market gaming also surged 33% to $2.59 billion.  While Macau’s strong growth will help the casino operators in the region, Las Vegas Sands in particular will continue to 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 (NYSE:MGM). We will be closely watching growth in the company’s mass-market gaming as China’s government may start taking action to clamp down on junket operators that bring gamblers from the mainland to Macau.  In such a scenario there could be a risk to VIP gaming revenues, which constitute more than 67% of the Macau’s overall casino revenues. 
Growth In Singapore
During the second quarter of 2013, Singapore’s economy grew at the fastest pace in more than two years on the back of strengthened services and a rebound in manufacturing.  According to the Ministry of Trade and Industry, the country’s GDP rose by 15% in the Apr-Jun quarter on an annualized basis.  Las Vegas Sands witnessed a 6% decline in its Singapore revenues during the Q1 2013 as the government introduced strict measures to minimize social costs from the casinos’ success. (read – Macau’s Surging Growth Fuels Las Vegas Sands’ Results). While it will be interesting to see how Singapore operations pan out this quarter, in the longer run we expect the company to continue to underperform in Singapore given the measures being taken by the government.
Our price estimate for Las Vegas Sands stands at $48, implying a discount of around 15% to the market price.Notes:
- MACAU HITS NEW QUARTERLY REVENUE HIGH THANKS TO MASS MARKET SURGE, Calvin Ayre, Jul 18, 2013 [↩]
- Macau Casinos Decline After Report on Junket Crackdown, Bloomberg, Feb 6, 2013 [↩]
- Smooth Sailing, Asgam, Jul 18, 2013 [↩]
- Singapore’s GDP Surprise, The Diplomat, Jul 16, 2013 [↩]
- Singapore’s GDP Growth Improved in the Second Quarter of 2013, Ministry Of Trade And Industry, Jul 12, 2013 [↩]