Buy Las Vegas Sands for Less Than What It's Paying for Itself

Las Vegas Sands  (NYSE: LVS  ) has led the industry with an incredibly profitable last few years, thanks in large part to the company's strong and growing operations in Macau and help from its Singapore resort. With first-quarter 2014 revenue of a record $4.01 billion, up over 21% year-over-year, and nearly 50% EBITDA growth at its Chinese operations, Las Vegas Sands has kept the trend going in 2014. This is well above the 10% revenue growth of Wynn Resorts (NASDAQ: WYNN  ) and the 12% revenue growth of MGM Resorts (NYSE: MGM  ) for the same period.

Because of this growth, and with more expected in the near future, Las Vegas Sands has been busy buying back shares. Companies usually buy back their own shares when they feel they're undervalued and expect future growth. If the company is bullish on itself at around $80, you should feel comfortable with a bet on the company at its current price of around $75 (as of this writing). Here are the comments from Sands leaders on their buybacks, as well as reasons why investors should be even more excited now that the stock trades at a discount to those figures.


Macau: a city of profit for Las Vegas Sands has continued to drive profits in Q1. Photo: SCMP.com

CEO Sheldon Adelson has been a cheerleader for LVS stock and its future prospects, such as a potential bet on Japan. Photo: Bloomberg

A hefty bet on itself: Las Vegas Sands' aggressive buyback
One part of Las Vegas Sands' first-quarter earnings call that got analysts asking questions was a discussion on the company's decision to buy back an unexpectedly large number of shares during the first quarter. After a JP Morgan analyst asked about the company using 1.2% of its market capital to buy back shares at an average price of $80.80, higher than the average price for April up to that point, CEO Sheldon Adelson took the opportunity to explain his bullish position on the company's future.

While he did not give hard numbers on the current buy-back plans for the second quarter, Adelson replied:

I think what's fair to say is that we see value on the stock. And if we saw value at an average of $80.80, we still see value in the stock and you guys will hear from us about how much we bought when we get to the next time we get together...I don't think anybody was expecting us to buy over $800 million in one quarter, because we said we are going to buy at least $75 million a month. It was an opportunity. And I hope we don't get too many downtrend opportunities, but we are looking at with the future where our stock is going to go. Some and other analysts just increased our price to $97 just before we started this call and I think I haven't done a study, but I think the majority of our 28 to 30 analysts covering the company are all advised and I think mostly outperformed and that our growth we have such confidence in the growth of the company.

Then, responding to another analyst question about the potential for Las Vegas Sands buying back more shares this quarter, Sheldon said that "The cash flow, the free cash flow that we will have in 2014 is significant, so significant that we could repeat our buyback program probably at another $2 billion." This is 2.5 times as much as the $800 million spent in the first quarter. Take this as a good sign that since the company remains this bullish on itself, investors can expect the company to return more money to them through share buybacks in the next three quarters.

Similarly, Wynn Resorts, repurchased about 5% of its stock outstanding closer to the $100 level 2012 and into the beginning of 2013. Wynn's stock currently sits above $200, making that a good bet for Wynn. Now Sands is making the same bet, and there are many reasons to believe that Las Vegas Sands will continue its strong growth in the next few years, making this current round of stock repurchases good for the company, and its investors.

Adelson continued on to note that he personally hasn't sold his Las Vegas Sands shares in over eight years. Compare this to MGM Resorts, which over the last 12 months has reported 66 insider trades, all sells, for a total of 954,947 shares.

Where will this future growth come from?
Robert Goldstein, Las Vegas Sands' president of global gaming operations, then chimed in to say:

We are thrilled with $13,210 per table right now, Shaun, but we think we can get a lot stronger. We grew 181 tables year-on-year and that increased to 13.2. Our target is 15,000, 16,000 per table in the future. Our target is keep converting as always you can get those kind of numbers out of our non-rolling segment.


The coming LVS force on the Cotai strip. Photo: Las Vegas Sands


If the company can hit those numbers, and its last quarter proves that is very possible, then the company will reap even higher profits from its new casino coming in 2015. The Parisian, Las Vegas Sands' newest Cotai-strip resort, will put Las Vegas Sands even further ahead of other companies for future gains in Macau. Sands will be profiting from this new resort one or two years in advance of MGM Resorts and Wynn Resorts, which are each planning to open new casinos in the area in the next two to three years.

The next major driver: Japan
While casinos are currently outlawed in Japan, gambling is already a well-liked hobby of the Japanese people, so much so that 47,800 of them visited Macau during the first two months of this year alone. However, these players will hopefully be able to play closer to home after the Japanese government votes this summer on legislation that will allow casinos to operate in the country.

Las Vegas Sands wants to be the forerunner in the bidding for casinos in Japan. Most major gaming companies, and many smaller ones, are counting on placing bids if and when the Japanese government allows it. However, Las Vegas Sands has been one of the most aggressive in this. At a conference in Tokyo earlier this year, Sands CEO Adelson said that "We will spend whatever it takes...would I put in $10 billion? Yes."

Foolish investors next move: Follow Sands lead
With Las Vegas Sands so bullish on itself, investors should feel confident that the company has a good operational plan for continuing to bring in the revenues and profits that we've seen in the last few years.

Of course, Foolish investors won't purchase shares of a company just because the company is buying back its own shares. However, couple that with the incredible overall revenue and profit growth which has steadily occurred over the last few years as well as expansion in Macau and possibly Japan in the coming few years, and any Fool can see that Las Vegas Sands is a strong bet.

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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 June 02, 2014, at 12:00 PM, pondee619 wrote:

    Is LVS unique in not over paying on it's share buy backs? I seem to recall many fool articles being critical of companies' buybacks at inflated prices. Why is LVS different?

  • Report this Comment On June 03, 2014, at 12:36 PM, blackjackkid wrote:

    The party is over for LVS and the other Macau-centric stocks

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