Las Vegas Sands (NYSE: LVS ) said "adios" to its highest-risk development today in a move that should be cheered by investors. CEO Sheldon Adelson is walking away from a potential $30 billion investment in Madrid, dubbed EuroVegas, that could have given a boost to Spain's economy. But the government balked at conditions such as investment guarantees and compensation for losses related to future Spanish laws, giving the company an out on the project.
It had become apparent in recent months that Las Vegas Sands was dragging its feet in Spain, making a fuss over matters such as smoking in the casino and Internet gambling. The reality is that Spain's economy is so terrible that a project of that size would be a huge risk, even for Las Vegas Sands.
Long term, this gives Las Vegas Sands the flexibility to return cash to shareholders or explore growth projects in Asia, which has been a gaming hotbed for the past decade.
Making way for Asian growth
Las Vegas Sands has become a dominant player in Asia, with four resorts in Macau and one of only two in Singapore. The success of these regions has caused other countries to consider opening up gaming restrictions, giving Las Vegas Sands some expansion options. Japan is the most attractive because of its wealthy economy and close proximity to millions of potential gamblers, but no one knows when it will actually give the OK to casino companies.
There is some hope on the horizon, though. Japan has been talking about opening up to casinos for years, and with the 2020 Olympic games coming up, there's some urgency to get a deal done. Japan's government is moving ever closer to legislation that would open up bidding, paving way for licenses in 2016.
Singapore, the Philippines, and South Korea have already opened up gambling. Japan is the biggest opportunity left in Asia, and now becomes a top priority for Las Vegas Sands.
I've never been a big fan of Adelson's plans in Spain, and now that he's given up on them, the company has the freedom to grow elsewhere or increase payments to shareholders. Both are a better option than a high-risk multibillion-dollar project in a country with a floundering economy.
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