Las Vegas Sands (NYSE: LVS) has received an extension on a key project in Macau that will add significant upside to the company's operations. The property, known as Lot 3, is located next to the Four Seasons and across from the company's Sands Cotai Central in the heart of the Cotai Strip. The property has been in limbo since Las Vegas Sands needed an extension from its original commitment to complete the property by August 2011 and wasn't going to meet the new April 2013, deadline either. Now, the company has until April 17, 2016, to complete the project, although the extension comes with a currently unknown penalty.
Sands was always confident that it would retain rights to the land, committing $96 million to developing the land already, but after losing Lots 7 & 8, there was at least some trepidation that Lot 3 might fall into the same category. Now investors know the company should have enough time to complete the project.
The next building boom in Macau
This isn't the only development going on in Macau right now. Melco Crown (Nasdaq: MPEL) is building Studio City, Wynn Resorts (Nasdaq: WYNN) has a new project being built on Cotai, Galaxy is building the second phase of its resort, and MGM Resorts (NYSE: MGM) is hoping to get the go-ahead on its Cotai project very soon. For the next few years, the Cotai skyline will be full of construction cranes and companies will be in a desperate search for labor that is short in Macau right now.
The stock market doesn't seem to be affected by the news, with shares slipping slightly today, but I think this is big news for the stock. When I compared Las Vegas Sands to Melco Crown last week, I pointed to a 7.64 enterprise value/EBITDA ratio (after adjusting for Cotai Central) as a grood value for the stock but gave Melco Crown the edge because of its growth prospects. This news gives Las Vegas Sands a way to grow further in Macau and may swing the advantage back to the gaming giant.
A lot of bang for your buck
Investors appear to be worried about a slowdown in Asia and expanded gaming affecting all gaming stocks, but I'm seeing a lot of value in the industry right now. Buying Las Vegas Sands with an EV/EBITDA ratio under 8 with another 4,000-room development in the pipeline gives investors great value. I still have an outperform CAPScall on the stock, and even though it is currently losing to the market by 15 points, I think the company will make that up in the long term.
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