Viva Las Vegas, Via Singapore
11/18/2010 1:30 pm EST
Nicholas Vardy, editor of Global Stock Investor, writes that Las Vegas Sands has hit a huge jackpot in Asia.
Las Vegas Sands (NYSE: LVS) is best known among most Americans as the operator of The Venetian Resort Hotel Casino, The Palazzo Resort Hotel Casino, and The Sands Expo and Convention Center in Las Vegas.
But Las Vegas is a small (and shrinking) part of Las Vegas Sands’ business. Although it entered Asia less than a decade ago, already more than 75% of its revenues come from outside the US, including properties in Macau, China, and what has been hailed as the world’s most expensive casino, the $5.5-billion Marina Bay Sands in Singapore.
A special administrative region of China, Macau quietly has become the world’s biggest gambling hub, overtaking the Las Vegas Strip in revenues back in 2006. By 2010, there was no contest: In the 12 months through July 31st, the Strip generated revenue of $4.92 billion; Macau is expected to generate $22 billion by the end of 2010, up from a record $14.9 billion a year ago. That will make Macau more than four times the size of the American original.
The “Great Recession” served to [widen the gap] between Las Vegas and Macau. While Las Vegas still is struggling to get back on its feet, Macau’s gaming industry has come roaring back. Macau-wide casino gambling revenue jumped 59% in the first ten months of this year. Gaming revenues in October hit a record high, soaring to $2.4 billion.
Thankfully, Las Vegas Sands is well-positioned to profit from this growth. It now has three properties in Macau: The Sands Macau, Venetian Macau, and The Four Seasons Macau. In the most recent quarter, net revenue rose for these properties by 29%, 31%, and 196%, respectively.
For all the potential of Macau, LVS’ $5.5-billion Marina Bay Sands in Singapore may be the real feather in its cap. Open only six months ago, it’s already being talked about as the most successful casino launch in history. It now attracts 25,000 visitors a day, and a rise to 70,000 is forecast for next year when the resort is fully open.
Nearly 300,000 non-guests have visited the spectacular 150-meter-long infinity pool on the 57th-floor roof, overlooking the Hong cityscape. The Marina Bay Sands hotel boasts no fewer than five celebrity-chef restaurants. Its shopping mall—with clients like Tiffany, Jimmy Choo, and La Perla—attracts the top global retail brands. After only six months of operation, analysts already are projecting that Singapore’s gambling revenues could be larger than the Las Vegas Strip [by] as early as 2012. That translates to annual pre-tax profits of around $1 billion for Las Vegas Sands.
LVS recently crushed analysts’ estimates for the third quarter, [and] the news keeps getting better and better. The average earnings estimate for 2011 was $1.05 a few months ago. Today, it’s up to $1.62. As Asian economies continue to expand at breakneck speed, Las Vegas Sands will continue to beat investors’ expectations.