Cotai Drives Las Vegas Sands' Record Results

The Venetian Macau continues to drive Las Vegas Sands.

Travis Hoium
Travis Hoium
May 2, 2013 at 8:49PM
Consumer Goods

As expected, Cotai is driving Las Vegas Sands' (NYSE:LVS) results to record levels on the back of massive mass-market growth. The company reported earnings last night, and revenue grew 19.5%, to $3.30 billion, and earnings per share rose $0.01, to $0.71. The bottom-line comparison was heavily affected by a lucky quarter last year, which I'll cover below. 

Growth on Cotai continues
It's no surprise that Cotai was the driver of Las Vegas Sands' numbers. Last week, Wynn Resorts reported earnings, and showed only 4.4% revenue growth versus 14.8% growth for Macau as a whole. You could see a good quarter forming for both Las Vegas Sands and Melco Crown, which are the only two U.S.-traded companies with exposure to Cotai. 

The Venetian Macau continues to be the driver of results despite Sands Cotai Central being a newer resort. Revenue rose 12.9%, to $872.2 million, at The Venetian Macau during the first quarter, and EBITDA jumped 23.6%, to $348.5 million. Interestingly, Sands Cotai Central only generated $131.5 million in EBITDA despite being almost completely open during the quarter, and Four Seasons Macau's EBITDA dropped 20.6%, to $53.6 million. Sands Cotai Central has a nearly identical number of tables as The Venetian Macau, so I expected revenue to trend across the street to the new casino.

Clearly, The Venetian Macau is the crown jewel on Cotai right now and will continue to drive results.

Singapore falls flat -- sort of
At Marina Bay Sands, revenue dropped 6.3%, to $794.9 million, and EBITDA fell 16%, to $396.8 million, but this is where luck played a major factor. Last year, the casino's rolling chip win percentage was 3.58%, an abnormally high level, versus 2.51% this year.

According to management, hold adjusted property EBITDA was up 15.7%, to $451.1 million, as VIPs and mass-market players gambled more. We're now getting close to the $2 billion in ongoing EBITDA annually that I think the resort can reach.

The big picture
If we take luck out of the picture, EBITDA rose 28.2% from a year ago, to $1.19 billion, driven by the opening of Sands Cotai Central. Earnings per share were also up 28.6%, to $0.72, if we adjust for luck. When Melco Crown reports earnings next week, I expect similar strong results, driven by The Venetian Macau's neighbor City of Dreams. Cotai is taking almost all of the growth Macau can muster.

My only reservation in making Las Vegas Sands my top gaming stock is the stock's price. The company is now valued at 13.9 times trailing EBITDA, which would only be slightly lower if we adjust for a full year of results from Sands Cotai Central. That's a steep price for a gaming stock, even one with the best properties in Macau.

How Las Vegas Sands came to dominate Macau

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