The Belt Is Tightening at Las Vegas Sands (LVS)

The Belt Is Tightening at Las Vegas Sands

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The $222 million loss for Las Vegas Sands (NYSE: LVS ) in the second quarter would have likely been disappointing to investors on its own, but was made only more so by the positive news out of Wynn (Nasdaq: WYNN ) earlier in the day yesterday. Though a red bottom line isn't my favorite sight, I did see some positives in Sands' earnings report.

But first, the bad. Like we saw with Wynn and will likely also see with MGM Mirage (NYSE: MGM ) and Boyd Gaming (NYSE: BYD ) when they report next week, business in Las Vegas was soft. Revenue at Sands' Vegas properties fell 17% while EBITDAR (a measure of cash flow) dropped 27%.

Operations in Macau, which make up the majority of Sands' top line, took a hit but held up better than the Vegas locations. Venetian Macau EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) slipped 22%, while Sands Macau actually saw EBITDAR climb 13%. Both properties also slumped on the revenue line.

Interestingly, gaming revenue took only a modest drop at all of Sands' properties, while room, food and beverage, and retail business provided the stronger tug on sales.

Now on to those positives I alluded to. In his concluding comments in the earnings release, CEO Sheldon Adelson said, "We remain focused on the reduction of our financial leverage, and we continue to aggressively pursue a comprehensive solution to our global liquidity needs." That, my Foolish reader, is music to my ears.

Although the company still has its Marina Bay development in Singapore on its plate through 2009 -- which will be plenty costly -- it has been chipping away at a cost-savings plan that it hopes will yield $500 million in annual savings by year's end. The company has also been cranking the rumor mill with a potential equity offering for its Macau business.

Combine a stable of top-notch properties with a focus on improving the balance sheet, and we could end up with a very attractive company. Of course, the path from point A to point B is fraught with risks -- not the least of which is dilution to current shareholders. However, for those willing to shoulder that risk, Las Vegas Sands at today's price could deliver some very solid returns.

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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy turns sand into glass just for fun.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On July 31, 2009, at 12:40 PM, spokanimal wrote:

Re: Room, food, etc. being more responsible for the tough results, Management suggested that any improvement to REVPAR would send 90% of the additional revenues to the bottom line. That's a bold statement... like filling chairs on a ski lift or getting a higher dayrate on a drilling rig.
I think that statement is symptomatic of one of the 2 most key elements to the future success of LVS (the other being the quality and locations of their assets). LVS has tremendous, pent-up leverage. The most obvious is the $500 million in expense cuts which are touted by the company as permanent and a potential accelerant of earnings once revenues pick up. The less obvious is the cost of their debt, which currently averages an ultra-low 2.97%. A lot of that debt is floating-rate and tied to LIBOR, which central banks are telling us will not be rising right away, but it's highly likely that those interest costs won't rise until the economy picks up and even then, 5% interest still beats the pants off the competition's assortment of junk bonds.
No debt comes due over the next year but EBITDA problems mean the covenants on that debt are the one problem any IPO or other recapitalization will need to resolve. Once they get that done, Maybe all that surging growth we're starting to see in China will start knocking the doors down again in the SAR.
Spok
Report this Comment On August 03, 2009, at 4:41 PM, DustoffDon wrote:

What effect will $2.50 a share paid to share holders of record as of July 31 for LVS, to be paid by Aug.13th have on there bottom line?
I am betting (all punn's intended) that the stock will have a nice bounce up in value, especially with the new Casino opening later this year in Singapore.

updated Moments ago Sponsored by:
	DOW	12,801.23	-89.23	-0.69%
	S&P 500	1,340.47	-11.48	-0.85%
	NASD	2,902.05	-25.18	-0.86%

LVS	$51.67		-0.88	-1.67%
Las Vegas Sands Co…		CAPS Rating:

WYNN	$112.66		-0.93	-0.82%
Wynn Resorts, Limi…		CAPS Rating:

MGM	$14.59		+0.12	+0.83%
MGM Resorts Intern…		CAPS Rating:

BYD	$9.02		+0.03	+0.28%
Boyd Gaming Corp		CAPS Rating:

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The Belt Is Tightening at Las Vegas Sands

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Report this Comment On July 31, 2009, at 12:40 PM, spokanimal wrote:

Report this Comment On August 03, 2009, at 4:41 PM, DustoffDon wrote:

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