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3 Things to Watch With Las Vegas Sands

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Las Vegas Sands (NYSE: LVS  ) owns and operates resort properties in the United States, Macau, and Singapore. It derives its revenue from a mixture of hotel bookings and gambling revenue.

Today, let's look at three things that investors should be watching regarding Las Vegas Sands, as they will provide us better insight into the company.

1. Macau development
With macroeconomic weakness the norm since 2007 in the United States, Las Vegas Sands has had to look internationally for growth. Primarily Las Vegas Sands, along with rivals Wynn Resorts (Nasdaq: WYNN  ) and MGM Resorts (NYSE: MGM  ) , have set up shop in Macau in mainland China to take advantage of the rising number of middle-and-upper-class citizens in China and to attract tourists.

Las Vegas Sands already has three hotels in Macau and recently opened up its fourth in the region. Based on the company's most recent quarterly report filed back in April, all of its hotel properties (except for the Sands Macau) are showing double-digit casino revenue growth -- with the strongest growth coming from Macau -- specifically the Four Seasons Hotel Macau, which saw a 74% increase in net revenue in the latest quarter.

However, growth in China isn't guaranteed. Wynn Resorts reported earnings last week and noted deteriorating gaming revenue in Macau and Las Vegas. Overall revenue fell 9% with Macau revenue dipping 7%. It just goes to show that even high-growth China may not be immune to discretionary spending tightness.

2. Online gambling
In June, International Game Technology (NYSE: IGT  ) and Bally Technologies (NYSE: BYI  ) were granted the first online gaming licenses in the United States. Although there are still plenty of hurdles to clear, this move essentially clears the path for these two companies to move toward offering their services to casinos in the hope of taking a chunk of the $32.8 billion in online gaming revenue last year.

There's just one snafu with this online gambling idea... Las Vegas Sands CEO Sheldon Adelson isn't on board. Adelson has steadfastly been against the online legalization of gambling since the discussion began and could be on the wrong end of a winning trade if the approval process keeps streaming along. If approved, Las Vegas Sands would most likely join its peers in offering online gambling, but would be months, or even years, behind its peers in rolling out online gaming tools.

3. Global economic health
It probably goes without saying that any investor should stay abreast to the overall health of the global economy; but it's considerably more important when dealing with a sector that relies entirely on discretionary spending for its revenue.

Historically high unemployment rates in the United States coupled with stagnant wage growth have allowed resorts in Las Vegas to have small spurts of growth, but it hasn't been anything that would be regarded as sustainable. With European sovereign debt further weighing on spending and China's GDP growth slowing to its lowest levels in more than three years, it'd be only logical to expect resort and casino operators to struggle over the near term.

Take MGM, for example, which has lost money on an operational basis -- even including its MGM Macau property -- since 2008. It did report a sizable profit last year, but that was only because of the one-time gains from its MGM China IPO. It goes to show that much of the resort sector continues to struggle through a weak global economy.

Foolish roundup
Now that you know what to watch for, it should be easier to analyze Las Vegas Sands' successes and pitfalls in the future and hopefully give you a competitive investing edge.

If you're still craving even more info on Las Vegas Sands, I would recommend adding the stock to your free and personalized watchlist so you can keep up on all of the latest news with the company.

Just as Las Vegas Sands is looking overseas for growth, our team of analysts at Stock Advisor realizes that the emerging markets are where some of America's biggest companies stand to make their biggest gains. Find out which three American companies are on track to log huge profits from their dominance of the emerging markets by clicking here to get your copy of this latest, free, special report.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy that always bets on black.

Read/Post Comments (2) | Recommend This Article (5)

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 Report this Comment icon found on every comment.

  • Report this Comment On July 27, 2012, at 7:07 PM, cp757 wrote:

    Sean this idea that online gambling is going to be a big money maker is just not true. You use a 32.8 billion worldwide figure like our casinos have a chance at that with poker. Most of that is European Race track betting and lottery's and its not from China. The chance for 3 or 4 players to sit in the same room and look at each others hands and take money from the other players is as easy as can be. The tools available to track the other players and know how to beat the other players is like shooting fish in a barrel. Everyone is pushing for this now but wait for the first scandal.

  • Report this Comment On July 27, 2012, at 7:16 PM, cp757 wrote:

    Sean your logic may be off when you say "China's GDP growth slowing to its lowest levels in more than three years, it'd be only logical to expect resort and casino operators to struggle over the near term"

    Las Vegas Sands has over 80% of its business in Asia and that is going to continue to grow. We seem to be cheering for Asia to fail but we need to understand that they are growing the middle class in China, as the United States had done so well in the past. That is the wealth builder

    Traffic from China to Macau has increased over the last Twelve Months Ending June 30, 2012. They will have over 30 million visitors from all of Asia in 2012 but these are the figures on some of the larger cities and provinces.

    Guangdong has 95 million people and the number that went to Macau was 8,295,741 up + 12%

    Fujian has 36 million people and the number that went to Macau was 931,500 up + 23%

    Zhejiang has 51 million people and the number that went to Macau was 603,219 up + 20%

    Hunan has 64 million people and the number that went to Macau was 584,318 up + 44%

    Shanghai has 19 million people and the number that went to Macau was 487,537 up + 20%

    Beijing has 22 million people and the number that went to Macau was 328,157 up + 27%

    Chongqing has 31 million people and the number that went to Macau was 195,931 up + 45%

    Tianjin has 12 million people and the number that went to Macau was 120,615 up + 44%

    The illegal gambling in China is 600 billion dollars a year and they will go to Macau and gamble . This will not slow down because of any GDP change from 12% to even 7% and to think it will is foolish.

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