Casino company Las Vegas Sands (LVS -0.72%), which sold off its Nevada properties and went all-in on Macao and Singapore, reported its third-quarter results on Wednesday. But while many other gambling enterprises are enjoying a vigorous 2021 rebound, Sands' revenue and earnings results were more reminiscent of the metrics it saw during 2020's COVID-19 lockdowns.

That's in part due to the Chinese government's restrictions on Macao. The question for investors from here is whether Sands has hamstrung itself with its Las Vegas exit, or whether its triumphant resurgence has just been delayed. The answer, perhaps, is that the situation is a bit of both.

Las Vegas Sands' latest results

While the company traces its origins back to the Sands Hotel built back in the mid-20th-century gangster days of Meyer Lansky and Benjamin "Bugsy" Siegel, who were among those who turned Las Vegas into a U.S. gambling hub, it refocused its business on Macao in the early 2000s under the leadership of Sheldon Adelson. Following Adelson's death, the company sold its last major U.S. properties (except for its headquarters) in March for $6.25 billion. The sale included both its Sands Expo and Convention Center, and its iconic casino and resort, the Venetian. That effectively ended its American operations; it now relies primarily on its Macao and Singapore casinos and resorts for revenue.

An aerial view of evening lights at Marina Bay in Singapore.

Image source: Getty Images.

With the die cast for that strategic shift, Las Vegas Sands appears to have taken a heavy hit from the Chinese government's recent Macao shenanigans. A recently proposed new law would tighten Chinese control over gambling in Macao -- at the expense of foreign companies and shareholders -- and possibly restrict dividends. Predictably for an authoritarian government, the exact details of the regulations remain clouded in secrecy, but seems to be trying to reduce gambling's importance to the Macao economy.

This will include compelling all casino operators to bid for renewal of their licenses in June 2022 -- with no guarantee they will be granted an extension of those licenses -- the possibility of government officials being stationed in casinos with authority to interfere in and control operations, efforts to reduce the flow of money from mainland China to Macao casinos, and state control over distribution of profits to shareholders. Other aspects of the potential new regulatory regime could slash casinos' margins

The local government in Macao has also vigorously responded to any indications of rising COVID-19 cases by repeatedly closing entertainment venues -- though casinos were exempted from some of these weeks-long mini-shutdowns. The temporary closures affected several of Las Vegas Sands' non-casino properties there, including a resort and retail hub -- The Londoner Macao, its enormous luxury mall The Plaza Macao, and possibly some of its hotels. 

In Q3, Las Vegas Sands' revenue jumped by 87.9% year over year to $533 million, while its revenues for the year's first nine months were up by approximately 65.8%. However, at the bottom line, it generated a $495 million net loss. That was considerably smaller than Q3 2020's $731 million net loss, but is still deep in negative territory. The company also has $14.5 billion in debt versus $1.64 billion in cash.

Sands' latest bottom-line results look more like those a casino company might have put up during last year's troubles. It's missing out on the rebound in Las Vegas that has been propelling peers like Caesars Entertainment (NASDAQ: CZR) higher. Caesars' stock price was up by 804% over the past five years as of mid-October 2021, outperforming the S&P 500's 110% gains more than sevenfold. MGM Resorts (NYSE: MGM) is also cashing in on the Las Vegas Strip's sizzling recovery. Its share price, relatively untouched by Macao-related concerns, is up by 231% over the past 18 months

Will Las Vegas Sands be "very, very fat and happy" as its CEO claims?

While its recent results, and share price, are currently overshadowed by the performances of peers operating in "Sin City," Las Vegas Sands' latest earnings conference call contained no trace of alarm or pessimism. CEO Rob Goldstein noted the company is awaiting full reopening in Singapore, and said that "spend in Macao has proven ... resilient." Sands' leadership, he said, has "great optimism about our ability to perform to a pre-pandemic level once visitation has returned." He noted that the sale of Sands' U.S. properties gave it additional liquidity it could use to bridge future slow periods.

Goldstein also said the successful 2021 Las Vegas reopening, occurring far ahead of the 2024 to 2025 rebound he heard predicted last year, foreshadows a similar swift, strong recovery in the near future in the Asia gambling market. He predicted a 2022 reopening for Singapore and other Asian markets, and highlighted that Sands can still earn $1 billion without Macao given the caliber of its Singapore operations. Even if China causes regulatory troubles, Goldstein says, the Singaporean, Japanese, Korean, and Malaysian "markets are very, very fat and happy for us."

Also notable is the fact that while Wall Street bid down Sands' stock price on the day following its Q3 report, its shares fell only a bit more than 2% in morning trading. The lack of a more dramatic plunge suggests investors may have already priced in most of the potential downside from the Singapore and Macao situations.

Las Vegas Sands appears to have dropped roughly as much as can be expected. Assuming the intensified Chinese regulation over Macao doesn't amount to a total ban on gambling or something nearly as catastrophic, Sands could be set for a scorching bull run once gambling in Asia turns around. That's likely to take place next year considering Asia's high and still-rising COVID-19 vaccination rates. The casino enterprise's stock is currently so low that it has massive upside potential once the rebound starts, meaning this could be an excellent buying opportunity for those investing in leisure stocks -- provided they're willing to gamble against regulatory risk and the uncertain timing of Sands' eventual triumphant recovery.