Location, location, location: that’s what they always say in real estate. And for Las Vegas Sands Corp., that’s proving entirely true, even if, ironically, it’s Macau, not Las Vegas, that’s turning out to be the casino company’s shining star.
“(Las Vegas Sands) remains predominantly a China secular-driven story,” noted Macquarie Securities gaming analyst Chad Beynon following the Sands’ third quarter P & L statement. “In our view, Las Vegas Sands remains the best Asian gaming growth and cash flow investment story.”
Macau Carries the Day
Despite a so-so performance from the Sands’ shnazzy Las Vegas Strip properties, the Venetian and the Palazzo, analysts are still gung-ho on Las Vegas Sands’ overall financial outlook.
“We continue to like the Macau gaming sector overall, driven by attractive marketwide revenue growth, particularly in the mass gaming segment,” added JP Morgan gaming analyst Joe Greff. “Las Vegas Sands’ hotel room base should allow [the company] to grow top line and [cash flows] in excess of the market participants.”
Seems the bully gaming market in Macau is still growing at a steroidal rate; some analysts expect the end-of-October figures to exceed any single-month revenue records to date. And the July – September 2013 quarter showed a 43 percent boost in Sands’ four main Macau gaming divisions, and a staggering 89 percent bump from the same time period last year. With $2.34 billion in net revenues from their Macau properties for the third quarter, it adds up to a whopping 65 percent of the company’s overall intake of $3.57 billion.
No wonder Sands CEO Sheldon Adelson is pouring more development funding into another project there; he has $2.7 billion earmarked for a new 3,000-room property that has a Parisian theme and a 2015 expected opening. That will make five major casinos there (and why not when they’re making money hand over fist): the Venetian Macau, Four Seasons Macau, Sands Macau, and the multiple-hotel Sands Cotai Central project, along with the new resort being planned.
Non-Gambling Profits Also Doing Well
And it’s not just gaming that’s going gangbusters for Sands in Asia; non-gaming revenues are pulling their weight as well, according to Rob Goldstein, the company’s president of global gaming operations.
“With our room base, that’s a very positive thing for us,” Goldstein said, referring to the trend of mainland Chinese tourists coming to – and staying in – Macau. “They stay longer, come from further away and require sleeping rooms. So Sheldon’s (Adelson) 9,000 sleeping rooms in Cotai turned out to be a pretty good idea.”
Susquehanna International Group gaming analyst Rachael Rothman agrees, adding that the growing influx of tourists to Macau highlights “…the importance of the infrastructure build-out in greater China that continues to increase Macau’s reach.”
Adelson will be the major contributor to that much-needed infrastructure, which includes a $10 billion Hong Kong-Macau-Zhuhai Bridge slated to open in 2016. The bridge will greatly cut down on the drive time it takes for visitors to reach Macau from China, which, as anyone who has ever sat in traffic knows, is always a good thing.
Sands’ Macau success has analysts chomping to see what the casino company will do when and if Japan legalizes gambling as well. Sands president Michael Leven says that Asian country’s $6 billion a year casino market would match what’s happening on the Las Vegas Strip, but Macau’s $38 billion take in 2012 will be hard to top, especially as those figures are up another 17 percent as of end of third quarter 2013.
Leven adds that a Japan venture would not be without a hefty investment plan.
“Japan would obviously be the most expensive investment we’ve ever made from a single-property standpoint,” he said.