Las Vegas Sands $51 Value Underpinned by Record Macau Gaming Growth

by Sharon Singleton
Las Vegas Sands
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The latest figures for gambling revenue from Macau should provide further upside for Las Vegas Sands‘ (NYSE:LVS) share price, which came under pressure last month on concern a slowing Chinese economy would hurt casinos operating in the former Portuguese colony. Las Vegas Sands operates the Venetian Macao, the Sands Macao and the Four Seasons Hotel in the former Portuguese colony, now the world’s biggest gaming hub. It competes with licensed casino operators such as SJM Holdings (880.HK), Wynn Resorts (NASDAQ:WYNN), and MGM Resorts (NYSE:MGM).

Fitch sees no slowdown in gaming revenues

Macau’s official gaming body said this week that gambling revenue jumped 42% to a record 26.85 billion patacas in October. Accumulated gross revenue for the first 10 months of the year stood at 221.2 billion patacas, up 45% from the same period in 2010, according to statistics on the official Gaming Inspection and Coordination Bureau web site.

According to Trefis analysis LVS’ Macau operations comprise the most significant factor driving the company’s share price, making up 54.9% of its valuation. The company’s shares are now trading around $43.47 after recovering from just shy of a 52-week low in early October. That’s still some 17% below the Trefis estimate of $51.05.

Macau is the nearest legal destination for mainland China’s increasingly affluent consumers. Despite concerns on the contrary, ratings agency Fitch in recent research said it has seen no evidence that tighter credit conditions and slowing growth in China are harming gaming demand in Macau. The ratings agency sees gaming revenue growth of 20% or more again in Macau next year.

Future expansion plans

Las Vegas Sands should be well placed to take advantage of further growth as it has a major new project scheduled to open in March next year. The 13.7 million square foot Sands Cotai Central will feature more than 5,800 hotel rooms. The resort will also be the last major addition of supply in Macau for some time as the government has imposed a cap on new tables through 2013. These caps help ensure that there is a balanced growth and will support LVS’s

The company expects the new resort to help drive key multi-night leisure and business travel in the region, rather than just attracting day trippers from across the Chinese border.

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