When a company gets to be the size of Las Vegas Sands (NYSE:LVS), there isn't a lot that can jostle its operations. In the second quarter, Macao and Las Vegas were steady, and we saw steady results from the company's earnings report. 

What moves the needle long-term is the introduction of new resorts that expand existing markets or expand into new markets. The company is between big projects right now, though, so expectations from investors are that the cash flow machine will keep running and power the company's increasingly valuable dividend. Unless a new market like Japan hits, that cash flow machine is all Las Vegas Sands has to offer. 

Venetian Macau in Macao.

Image source: Getty Images.

A glance at the quarter

To get a sense of what Las Vegas Sands is doing, let's look at high level results. Second-quarter revenue rose 0.9% to $3.33 billion and net income jumped 63.9% to $1.1 billion, or $0.70 per share. Income was helped by a $556 million gain on the $1.16 billion sale of Sands Bethlehem. The company also announced a $0.77 per share quarterly dividend that will be paid to shareholders of record on September 18. 

Growth wasn't all that impressive, but there were some bright spots, and they underline the company's long-term strategy. 

The Macao strategy is working

Macao, which accounts for about 60% of Las Vegas Sands' business, had flat gambling revenue in the second quarter overall, so growth was hard to come by for operators. For the most part there was just shuffling of demand as new resorts opened or expanded. But Las Vegas Sands held its own with the key mass market segment. 

The Parisian Macao and Four Seasons/Plaza were the two best performers during the quarter, with revenue growth of 11.6% and 13.4%, respectively, for totals of $414 million and $211 million. The Venetian Macao, the company's oldest resort in the Cotai region, had revenue growth of 2.9% to $854 million, and adjusted EBITDA rose 1.5% to $336 million. 

The weak spot was Sands Cotai Central, which is undergoing a $2.2 billion update to rebrand as The Londoner Macao. The property's revenue fell 5.1% to $483 million, and adjusted EBITDA fell 6.3% to $165 million. 

Overall, Las Vegas Sands held its own in Macao, with revenue up 1.4% to $2.15 billion and adjusted EBITDA up 2% to $765 million. Its steady performance is proof that the mass market focus is working well in Macao. Over the past year, mass market table win rose 14.7%, compared to a loss of 13.7% in VIP gaming revenue. Las Vegas Sands knows where its best market is, and it's gaining share despite increasing competition.  

Investing in the future

There aren't any big new markets for Las Vegas Sands to grow into (Japan isn't open yet), so the company continues to make incremental improvements to existing properties. The biggest project is a $3.3 billion expansion of Marina Bay Sands in Singapore. The property has seen revenue and EBITDA stagnate over the last three years, but with $688 million of revenue and $346 million of EBITDA last quarter it's still one of the most valuable properties in the world. The addition of about 1,000 new hotel rooms and additional entertainment and meeting space will be a good revitalization of the property, even if the price tag is extremely high. 

As exciting as Macao and Singapore are for Las Vegas Sands, the big whale it's looking to land is a gambling concession in Japan. CFO Patrick Dumont said the company is going as far as leaving room on the balance sheet to build in Japan. 

If you look at our capital structure and if you look at the nature of the way we borrowed, I think the key thing here is that we've been very conservative with the anticipation of having the opportunity to development in Japan. So, we always wanted to make sure that we had ample balance sheet capacity to be able to fulfill our Chairman's highest and best use, which is deploying capital in new projects. And so we would only invest in something that has a high return threshold that meets his criteria and the Board's criteria.

If Las Vegas Sands were to build a resort in Japan it could end up being one of the most profitable resorts in the world. And that's a project worth waiting for, even if the cost is stagnant revenue and earnings today.