Las Vegas Sands to Wynn: Mine's Bigger

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In the battle of Macau casino IPOs, Las Vegas Sands (NYSE: LVS) is making a bid for more money than rival Wynn Resorts (Nasdaq: WYNN), which launched its initial public offering on the Hong Kong Stock Exchange last month.

Sheldon Adelson, chairman and CEO of Las Vegas Sands, hopes to raise as much as $2.5 billion, topping the $1.87 billion -- including the underwriters' over-allotment -- realized by rival Steve Wynn, chairman and CEO of Wynn Resorts.

Las Vegas Sands already owns three Macau-based casino/resort properties, a ferry service between Macau and Hong Kong, a convention center, a medical and beauty spa, and retail malls. But the ambitious Adelson isn't finished there.

Great expectations
The CEO is developing casino/resort complexes on land known as the Cotai Strip. If his vision is fully realized, his Cotai Strip holdings will contain 20,000-plus hotel rooms, six theaters, 2 million square feet of retail space and, of course, gambling space.

In addition to the IPO to pay down debt, Adelson wants extra funds to finance Cotai Strip expansion. Construction started in 2006 and halted in November 2008 -- he now wants "supplemental financing" from lenders and says his company won't resume construction until it secures a commitment for the funds, according to a document filed Monday with the Securities and Exchange Commission. Worth noting is that according to a document obtained by Bloomberg, Las Vegas Sands may be interested in selling 15% of its Macau business via the IPO.

The company has spent $1.7 billion on the first Cotai projects, and it needs $2.2 billion to complete the first two phases of the development. A third phase, which would depend on market demand, will cost close to $443 million excluding interest expense.

Matching plans to economic reality
Las Vegas Sands' announcement -- which had been subject to hints, leaks, and recent speculation -- didn't get a warm response from U.S. investors, as the stock fell about 7% in early afternoon trading.

Recent third-quarter financial reports from Las Vegas Sands and Wynn demonstrate that Macau is playing a bigger role in their present -- and will play an even bigger role in their future -- than their Las Vegas properties.

Investors will probably remain skittish, since their success depends on the Chinese government's fluid policy on travel to Macau from the mainland, the effects of the recession, and competition from four other players, including MGM Mirage (NYSE: MGM) and Hong Kong-based Melco Crown Entertainment (Nasdaq: MPEL).

When it comes to gambling in the Far East, Sheldon Adelson, who plans to open a casino resort complex in Singapore during the first quarter of 2010, is far more motivated than anyone else. U.S. investors can only hope that Hong Kong investors as well as unsentimental bankers share his passion -- or are at least willing to finance it.