Compared to past years, 2011 has been relatively quiet for Las Vegas Sands (NYSE: LVS). The company didn't open any new casinos during the year, and it didn't even break ground on new properties.
That all will change in 2012, when the company gets back to its growing ways by opening Sands Cotai Central on the Cotai Strip, likely the last new resort in Macau until 2015 when MGM Resorts (NYSE: MGM) and Wynn Resorts (Nasdaq: WYNN) enter the scene. The 13.7-million-square-foot resort will be opened in three phases starting at the end of the first quarter next year.
The first phase includes around 200 mass table games, 40 private gaming rooms with 100 tables, 1,800 four- and five-star hotel rooms, and part of the 1.2 million square feet of retail, entertainment, dining, and MICE space.
Phase IIA will follow in the third quarter with 2,000 Sheraton-brand hotel rooms and another 200 mass gaming tables. Phase IIB is scheduled to open in Q1 2013 with another 2,000 Sheraton-brand hotel rooms.
What kind of impact can we expect from this development?
Sands Cotai Central, when complete, will have about twice as many hotel rooms as The Venetian Macau across the street but will have about half the gaming space. So it's likely to generate strong revenue and EBITDA for the company, but fall short of what the Venetian Macau generates.
It will also be interesting to watch how the added hotel rooms at Sands Cotai Central will affect Melco Crown's (Nasdaq: MPEL) City of Dreams next door, the Venetian Macau, and Galaxy Macau. As new resorts have been built on Macau revenue growth has slowed at some properties, but this resort will likely have some side benefits for everyone as more people visit the area.
With little capacity coming online in Macau it could also mean slowing competition for players and less dependence on junkets like Asia Entertainment & Resources (Nasdaq: AERL), which would help casino profitability.
The new crown jewel
What investors need to keep an even closer eye on than Macau is Marina Bay Sands in Singapore. The resort is now by far the company's most profitable resort and generated nearly half of its EBITDA in the third quarter.
Source: SEC Filings.
The straight-line growth of EBITDA in Singapore will likely slow in 2012 but even a healthy growth rate could drive the company, and its stock, forward.
Deleveraging
Now that Singapore and Macau are running on all cylinders, Las Vegas Sands has the opportunity to deleverage its operations, if it so chooses. Debt stood at $9.74 billion at the end of the third quarter with $593 million in principal due to be paid down by the end of 2012.
With $3.95 billion in unrestricted cash and nearly $1 billion in property EBITDA generated in the most recent quarter, the company could significantly deleverage its balance sheet in 2012.
The company could also begin buying back shares of its Macau operations, something I would like to see both Las Vegas Sands and Wynn Resorts do.
Las Vegas, anyone?
I almost forgot, Las Vegas Sands still has a resort in its namesake, Las Vegas. The irony is that not many people in the investing community really care about this resort when looking at results.
But visitors are returning to Las Vegas in nearly record numbers, which should be a positive for small players like Penn National (Nasdaq: PENN) and Boyd Gaming (NYSE: BYD) to giants like MGM Resorts and Caesars Entertainment. So feel free to up the ante in Las Vegas, just don't expect it to be nearly as important as what's going on in Asia.
A better year ahead
Las Vegas Sands' stock price hasn't gone much of anywhere in 2011, but I think that's partly due to high expectations coming into the year. The company's operations had to catch up with the stock and now that it has I think 2012 will be a much better year.
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