Investors in Las Vegas Sands (NYSE:LVS) have had a rough last 12 months. The stock has lost 25.5% of its value after dividends, while the S&P 500 has returned 15.7%. For a company that outperformed the market for years, the last year was a shock for investors.
But there are bright signs for Las Vegas Sands if you know where to look, and they could help bring better luck in 2015.
Macau isn't as bad as it seams
There's no doubt Macau is struggling because of a crackdown on corruption within Mainland China. Overall gaming revenue fell 24.5% in the fourth quarter, and every segment of the market struggled.
What's key for Las Vegas Sands is that mass-market play was only down 17.6% in the fourth quarter compared to a 29% drop in VIP play. The Cotai region Las Vegas Sands has been building out is more focused on the mass market, and that's helped ease the pain of the decline in gaming. As a result, Macau revenue was only down 16.3% to $2.1 billion in the quarter.
It also appears that Macau's business is starting to firm up, at least a little. Protests that brought Hong Kong, which is a natural feeder station to Macau, to a halt ended in December, and gaming revenue has been virtually flat for three months. That should help profits from falling too much in 2015, which would be enough good news to send the stock higher.
Singapore is back... sort of
No resort in Las Vegas Sands' portfolio has been more up and down than Marina Bay Sands. The property is the most profitable resort in the world, but luck can swing wildly, dramatically affecting earnings, as you can see below.
The fourth quarter saw luck swing to the house, but gaming play was actually down 3.3% in the mass market, and 26.8% in the VIP segment, potentially affected by China's corruption crackdown. Still, the bottom-line numbers were very strong, and that's something investors needed to see.
If Singapore ends its streak of bad luck and continues to see EBITDA above $400 million per quarter, the company will have a nice buffer, even if Macau struggles in 2015. That's the benefit of diversification for Las Vegas Sands.
The one thing that could drive Las Vegas Sands significantly higher is winning a bid to build a resort and casino in Japan. This is something that's been talked about for years and is still a goal of Sheldon Adelson. A single casino in Japan would likely cost over $5 billion, but it could conceivably be even more profitable than Marina Bay Sands in Singapore.
The problem is that Japan doesn't yet know if or how it's going to legalize gambling. Bills have floated around parliament for years without anything passing, so we could be getting our hopes up for nothing. But there appears to be support in parliament right now, and with the 2020 Olympics bearing down, there's some urgency to get a gaming bill passed, in part to pay for the Olympics.
The Union Gaming Group estimates that Japan could generate $10 billion in annual gaming revenue, and if Las Vegas Sands was one of a small group of winners, it would be a boon to the company and could send the stock higher.
None of these three things are guaranteed to come true, but if they do, it could help investors recover from a terrible year for Las Vegas Sands' stock.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.