Cotai Drives Las Vegas Sands' Record Results

As expected, Cotai is driving Las Vegas Sands' (NYSE: LVS  ) results to record levels on the back of massive mass-market growth. The company reported earnings last night, and revenue grew 19.5%, to $3.30 billion, and earnings per share rose $0.01, to $0.71. The bottom-line comparison was heavily affected by a lucky quarter last year, which I'll cover below. 

Growth on Cotai continues
It's no surprise that Cotai was the driver of Las Vegas Sands' numbers. Last week, Wynn Resorts reported earnings, and showed only 4.4% revenue growth versus 14.8% growth for Macau as a whole. You could see a good quarter forming for both Las Vegas Sands and Melco Crown, which are the only two U.S.-traded companies with exposure to Cotai. 

The Venetian Macau continues to be the driver of results despite Sands Cotai Central being a newer resort. Revenue rose 12.9%, to $872.2 million, at The Venetian Macau during the first quarter, and EBITDA jumped 23.6%, to $348.5 million. Interestingly, Sands Cotai Central only generated $131.5 million in EBITDA despite being almost completely open during the quarter, and Four Seasons Macau's EBITDA dropped 20.6%, to $53.6 million. Sands Cotai Central has a nearly identical number of tables as The Venetian Macau, so I expected revenue to trend across the street to the new casino.

Clearly, The Venetian Macau is the crown jewel on Cotai right now and will continue to drive results.

Singapore falls flat -- sort of
At Marina Bay Sands, revenue dropped 6.3%, to $794.9 million, and EBITDA fell 16%, to $396.8 million, but this is where luck played a major factor. Last year, the casino's rolling chip win percentage was 3.58%, an abnormally high level, versus 2.51% this year.

According to management, hold adjusted property EBITDA was up 15.7%, to $451.1 million, as VIPs and mass-market players gambled more. We're now getting close to the $2 billion in ongoing EBITDA annually that I think the resort can reach.

The big picture
If we take luck out of the picture, EBITDA rose 28.2% from a year ago, to $1.19 billion, driven by the opening of Sands Cotai Central. Earnings per share were also up 28.6%, to $0.72, if we adjust for luck. When Melco Crown reports earnings next week, I expect similar strong results, driven by The Venetian Macau's neighbor City of Dreams. Cotai is taking almost all of the growth Macau can muster.

My only reservation in making Las Vegas Sands my top gaming stock is the stock's price. The company is now valued at 13.9 times trailing EBITDA, which would only be slightly lower if we adjust for a full year of results from Sands Cotai Central. That's a steep price for a gaming stock, even one with the best properties in Macau.

How Las Vegas Sands came to dominate Macau

For many companies, successfully capitalizing on a booming Chinese economy is like winning the jackpot. That's indeed the case for gaming company Las Vegas Sands, which made a big bet on Macau gaming about a decade ago that's paid off in spades. The company is now looking to spread its empire further, but will it be able to replicate its prior successes? Learn about all these opportunities, and the risks they pose, in our premium report on Las Vegas Sands. Be sure to claim your copy today by clicking here.


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  • Report this Comment On May 02, 2013, at 9:51 PM, hulk04 wrote:

    LVS will be the only casino stock to show significant growth over the next few years with their ramp up of SCC... Also with their dominance in the number of tables & slots in Macau... If MBS continues to show the volumes they have over the past 2 quarters with better hold (law of averages) and Vegas continues to come back then LVS should continue its dominance over their rivals... Growth is on the side of LVS and no other company for the next few years. MPEL has had a great run as well but I don't count 1/2 a property in the Phillipines (with 4 casino licenses & $3B market) or 60% Studio City (with no casino license at this time) a growth story like lvs with a 5th Macau IR on the Horizon (Parisian)...

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