Where Will Las Vegas Sands Grow Next?

Las Vegas Sands (NYSE: LVS  ) has been on a growth tear since the company came public, driven by a savvy decision by Sheldon Adelson to focus his attention on expanding in Macau. Not only has Macau grown to be six times the size of the Las Vegas Strip, but Las Vegas Sands also now dominates Cotai, Macau's growth engine, with three resorts and another on the way.

LVS Revenue TTM Chart

LVS Revenue TTM data by YCharts

So, how can the company continue to keep the chart above moving higher in coming years?

Macau is the foundation
The first growth avenue investors should watch for is Macau. The company already has four major resorts there, most recently adding Sands Cotai Central (seen below), and owns a dominating position on Cotai. Overall revenue in Macau is up 16.2% this year, and momentum continues to be strong, so this will have the effect of lifting all casinos.

Image courtesy of Las Vegas Sands.  

The next phase of growth in Macau is The Parisian, a Paris-themed resort located next to Four Seasons Macau. This is likely to be the next major resort to open on Cotai, and it will give a foundation of resorts in the middle of Cotai.

After The Parisian opens in late 2015, it will quickly be followed by resorts from Wynn Resorts (NASDAQ: WYNN  ) , MGM Resorts (NYSE: MGM  ) , and Melco Crown (NASDAQ: MPEL  )  building more capacity on Cotai. If Las Vegas Sands were to only one building we could project a huge jump in growth but these new competitors will pull some potential growth away from existing casinos. Only time will tell of these developments will actually cannibalize some of Las Vegas Sands's Cotai revenue or create a critical mass that draws even more customers from the Macau Peninsula. What we do know is that adding more exposure to Cotai will be a positive for Las Vegas Sands one way or the other. 

A big bet on Europe
One growth avenue that's been on the table for years is a massive project in Madrid, Spain. Las Vegas Sands has registered the name Eurovegas for the development that could be over $20 billion when it's fully completed. Right now the project is up in the air and Adelson didn't give much detail in the last conference call other than saying "there are a variety of steps left in development process."  

Initially, Adelson plans have six casinos, 12 hotels, and $7.9 billion in investment from the company. The challenge is that gambling isn't exactly new to Europe and Spain's unemployment rate is still over 25%. That's not a healthy economy that could support major casinos and may be one reason Las Vegas Sands seems less eager to build in Europe than it was a few years ago.  

Foolish bottom line
The only sure growth for Las Vegas Sands in the foreseeable future will come from adding The Parisian and organic growth in Macau. Marina Bay Sands doesn't appear to be a growth driver, reaching critical mass quickly and now experiencing falling EBITDA from its peak. There are possibilities for gaming expansion in Japan and Korea but those will be years away any company.

Las Vegas Sands will have to leverage Cotai for growth, not a bad position to be in considering the fact that Macau is the largest gaming region in the world and Cotai is its hear and soul. Focusing on Cotai will probably be the right move given risks associated with opening up gaming in other parts of the world.

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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 September 18, 2013, at 8:27 PM, cp757 wrote:

    Travis I agree with you " adding more exposure to Cotai will be a positive for Las Vegas Sands one way or the other". To point this out a little more by 2017 the number of rooms, gaming space and MICE that Las Vegas Sands has will be huge.

    Las Vegas Sands # of rooms 12,454 for 44%

    Galaxy Entertainment # of rooms 4,559 for 16%

    Melco Crown # of rooms 3,677 for 13%

    Wynn Resorts # of rooms 3,014 for 11%

    SJM Holdings² # of rooms 2,339 for 8%

    MGM China # of rooms 2,187 for 8%

    People that stay at Cotai will want the best and they will choose between 12,454 rooms and gamble at the best casino Las Vegas Sands. They will not run around to the casinos that are off the Strip. Vegas has a hub and so does the Cotai Strip.

    Japan is widely viewed as one of the last great untapped markets due to its wealthy population and proximity to China. Union Gaming, a U.S.-based investment bank which organised the conference, predicted Japanese gaming revenues could top $15 billion a year, making it the second-largest market in the world after Macau.

    Travis your point about " possibilities for gaming expansion in Japan " is true but I think that LVS has the inside track on that.

    George Tanasijevich, president of Marina Bay Sands, displayed several potential casino designs, including a building featuring fin-shaped towers and another centered on an oval structure with a carved out centre he called "The Pearl".

    Tanasijevich said Tokyo and Osaka were prime locations for an integrated casino-resort complex similar to the company's profitable Singapore venture.

    "We are interested in both locations. They are ideal settings for what we do," Tanasijevich said. "The Olympics will spur infrastructure investment. That will help integrated resorts."

  • Report this Comment On September 19, 2013, at 12:44 PM, spokanimal wrote:

    This MF contribution needed to be proof-read before publication.

    Several things in this that Mr. Hoium got wrong.

    First of all, Parisian is not likely to be the next major development to open on Cotai. Galaxy phase 2 is well ahead of Parisian. I noticed that even though macau gaming concessionaires SJM and Galaxy are the #1 and #3 operators in Macau in terms of gross gaming revenues, Mr. Hoium left them completely off of his map.

    It is also noteworthy that Sands has a couple of other developments on Cotai besides Parisian, the most significant of which is the 4th, St. Regis tower at the Cotai Central development. Given that this piece was about "development", it was remiss to have excluded mention of them.

    The comment about Marina Bay Sands was also off base. The idea that "EBITDA" is an indicator of a resort that is peaking and tailing off completely ignores the fact that VIP gaming volumes there have soared in recent quarters... by 64%, 42% and 26% in Q4, Q1, and Q2 respectively. If not for poor hold (luck), Mr. Hoium's commentary on EBITDA would have been totally different. In fact, MBS table hold in Q4 of 2012 was the worst hold the resort has had since it was opened.

    Finally, the liklihood of gaming expansion in Japan is not "years away", as Mr. Hoium suggests. The first thing we teach CFA's on their first day in class is to read the business and financial news in the newspaper each day, and 2 things are very clear....

    .... Japan is poised to very likely legalize gaming by next summer... and Travis Hoium is certainly not a CFA.

    Spokanimal

  • Report this Comment On September 26, 2013, at 5:27 PM, mbablitz wrote:

    After reading what Spok and Cp wrote, I would say they should be writing about LVS for the Motley Fools... and Travis should be in Spok's CFA classes and do better research.

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