It's been a great year for Las Vegas Sands (NYSE: LVS ) shareholders. Over the past year, the stock is up 81.5% versus just 26.7% for the S&P 500. Astounding growth in Macau has fueled all stocks with exposure to the region and at the moment there doesn't appear to be anything but good signs for Las Vegas Sands.
So, is Las Vegas Sands a buy at today's price? Let's take a look.
The current landscape
Las Vegas Sands has a dominant position in Asia with four resorts in Macau and one in Singapore. Those four resorts far outweigh the value created in Las Vegas or Bethlehem, PA.
You can see below that The Venetian Macau and Marina Bay Sands dominate results with Sands Cotai Central beginning to contribute a sizable amount of EBITDA as well.
Source: Las Vegas Sands earnings releases.
In late 2015, another resort will be added called The Parisian, a Paris themed resort next to Four Seasons Macau. This will add another 3,000 hotel rooms and around 500 gaming tables to the mix. This is the only certain development, but Las Vegas Sands has also set its sights on Spain, Japan, and Korea for expansion.
From a valuation perspective, Las Vegas Sands' enterprise value is 15.1 times the EBITDA it generated last year. I would expect that to fall as Sands Cotai Central ramps up over the next year.
The good keeps getting better
What's driven Las Vegas Sands and other gaming stocks this year is incredibly fast growth in Macau. In the first eleven months of this year, gaming revenue is up 18.6% to $41.0 billion. The company collects over 20% of that revenue and its share is growing as it expands capacity.
In Singapore, growth has slowed but Marina Bay Sands looks to generate around $1.5 billion in EBITDA consistently, which is phenomenal for any company.
There's strong momentum in each of Las Vegas Sands' operating regions and if that continues the stock will rise.
Risks facing Las Vegas Sands long-term
Las Vegas Sands has enjoyed a dominant position on Cotai so far, with only Melco Crown Entertainment (NASDAQ: MPEL ) and Galaxy having resorts there. But over the next three years, Wynn Resorts (NASDAQ: WYNN ) , MGM Resorts (NYSE: MGM ) , and SJM will join the fray as well with new developments on Cotai and Galaxy and Melco Crown will further expand. This could take away some of Las Vegas Sands' market share in Macau.
There's also a bigger concern for Macau. The region's dirty little secret is that wealthy Chinese use Macau as a vehicle to launder money out of China. If the government cracks down on this or (more likely) restrictions on money flow out of China are eased it could have a huge impact on Macau's gaming revenue.
The final risk to worry about is Spain. Las Vegas Sands has plans to spend $22 billion to build a series of resorts known as EuroVegas. This would certainly come with lower returns than Macau and is a huge risk if it goes forward.
Foolish bottom line
The big question for me is around whether or not Las Vegas Sands is worth 15.1 times EBITDA. With the growth we've seen in Macau, Sands Cotai Central's rampup, and The Parisian coming online in two years, I don't think that's as outrageous as it looks and there's a lot of potential for EBITDA growth over the next three years.
Keep an eye on Las Vegas Sands' risk factors but I think the stock is a buy now and can move higher in 2014.
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