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Las Vegas Sands Proves Cash Is King

Las Vegas Sands (NYSE: LVS  ) is a unique company with not only hoards of cash available but also a management team which is willing to reward investors through more than one shareholder-friendly activity over the years to come.  Additionally, the company has every intention of investing its cash to further fuel its growth.

The global champion of gaming
Las Vegas Sands is a winner like no other in casino-resort development with properties in the U.S., Macau, and Singapore. It ended the recent quarter with revenue of $4.01 billion and an unrestricted cash balance of $3.30 billion.

Macau is the largest gaming market in the world and Las Vegas Sands' property Sands China holds the largest share in the region, according to analysts at Barclays who estimate that the casino holds a 23.4% share of total gaming dollars. This ranks Las Vegas Sands ahead of second-place Galaxy Entertainment's 16.7% market share and third-place Melco Crown's 16% share.

Looking toward Japan
Japan's gaming market could reach $13.4 billion to $15 billion by 2020 according to analysts at Citigroup, and this would make the nation Asia's second-largest gaming market after Macau.

On Las Vegas Sands' first-quarter 2014 conference call on April 24, Las Vegas Sands' CEO Sheldon Adelson said that activity levels in Japan remain "robust" and he is still committed to pursuing the market.

In late 2013, Las Vegas Sands walked away from a $35 billion investment in Spain, and there is little doubt that the company is anxious to find new projects where it can put these funds to use and replace what had been dubbed "Eurovegas." With that in mind, Sheldon Adelson said that he "will spend whatever it takes" to win contracts in Japan.

Las Vegas Sands will be competing against other casino developers such as MGM Resorts (NYSE: MGM  )  for the rights to build a resort in Japan. MGM Resorts has stated that it is prepared to spend up to $10 billion in Japan but Las Vegas Sands holds the upper hand.

Michael Leven, Las Vegas Sands' President and Chief Operating Officer, noted on the company's fourth-quarter 2013 conference call on January 29 that 22% of the company's non-gaming business in its Singapore property, Marina Bay Sands, has Japanese components to it in the forms of meetings and conventions.  Investors could deduct from this statement that Las Vegas Sands has already established a reputation for providing excellent services to Japanese gamblers, which gives the company an advantage over peers that cannot make similar arguments.

Las Vegas Sands is in the unique position of being able to finance a $10 billion project in Japan using "all cash" according to Adelson. Appropriately, the rating agency Fitch views the prospect of developing in Japan "positively." 

"LVS would likely be on the short list of bidders to win a license given its financial profile and track record of developing successful integrated resorts in Singapore, Macao and Las Vegas," the rating agency explained in late December. It added, "unlike Spain, Fitch would view the prospect of developing in Japan positively (aside from the heightened development risk if the Japan development overlapped with Spain)."

Fitch shies away from describing MGM's prospects in Japan as equally positive. The rating agency cautioned that MGM's already-existing pipeline of projects, which includes its $2.6 billion Cotai resort (set to open in 2016), is "manageable but related uncertainty pressures ratings."

If push comes to shove and Japan gives the green light to begin construction on casinos as soon as 2016 (as suggested by Japan Times), MGM Resorts' ability to manage two major construction projects could worry some investors while Las Vegas Sands' experience with juggling multiple projects while maintaining a strong balance sheet should ease investor concerns.

Dividends and other shareholder-friendly programs
Over the last nine quarters through March 31, Las Vegas Sands has returned more than $7.3 billion to shareholders in the forms of dividends and stock repurchases. Las Vegas Sands has committed itself to a fiscal-2014 dividend target of $2.00 per share or $0.50 per quarter.

Adelson gets excited over the company's ability to continue paying shareholders and had the following to say during the company's fourth-quarter conference call:

It's my job together with our outstanding management team to make sure we stay disciplined and continue to execute our strategies that will both extend our industry leadership in current and new markets and generate strong growth and outstanding returns for our shareholders in the years ahead. Yay! dividends!

Adelson had previously guided that the company will buy back $75 million worth of its stock each month. That is, unless the company exceeds its guidance as it did in the first quarter when the company bought back $810.0 million of stock!  

Bottom line
Las Vegas Sands could be considered the envy of other casino operators because the company doesn't even feel the need to monetize all of its assets.  Adelson estimates that Las Vegas Sands has between $12 billion to $14 billion worth of "monetizable" retail mall sales potential, but the company doesn't feel the need to pursue this venture today.

"If and when we decided that it was time to monetize them, all we have to do is pull the trigger," Adelson said on the company's fourth-quarter conference call.  Adelson updated investors on the first-quarter conference call with the following:

As long as we are growing in moderate double-digits, 20% some odd we are not selling assets, because nobody is going to pay us what we think it's really worth. When the growth curve ends up at give or take single digits up to 10%, then we would consider seriously selling.

Las Vegas Sands has an "ace up its sleeve" that will stay put until the company needs it, that is, if the company ever needs it in the first place.

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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 May 12, 2014, at 1:32 PM, spokanimal wrote:

    Sands has a ton of EBITDA, but only a couple of development projects currently; Parisian and the St. Regis Tower at Cotai Central.

    It's for that reason, in addition to the fact that the earning power of their cotai mall assets continues to escalate, that they are hanging onto those non-core assets.

    As long as those assets are appreciating at a faster rate of speed than an alternative, liquid investment would if they SOLD those assets, then why not stay invested in them until they need the proceeds for something more lucrative... like Japan.

    Also, regarding the $810 million Q1 stock buyback... it remains an irritant to many investors that these buybacks are not proportionately reducing the total shares outstanding.

    In this case, the Q1, fully diluted share count decreased by about 5 million shares from Q4, which as $75 per share, only amounts to $375 million worth of stock. That means that LVS ISSUED another $435 million worth of stock that offset more than HALF of the so-called "massive" stock buyback worth $810 million.

    What that means is, even though LVS is, and has been executing excellently, they are still significantly more "fast and loose" with share issuance relative to most companies, and they need to tighten that up some in order to be truly as "shareholder friendly" as they aspire, and proport to be.


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