Reply to a friend regarding LVS pro and con going forward...
My take: LVS has become a fairly pure forward EPS stock. That EPS is around 25x. There are many factors that can change that multiplier up or down in the near term of say 12 to 18 months out... Some of the positives would be Japan approving casino resorts. Some other Asian country approving casino resorts such as Taiwan or SKorea. A non-core asset sale of a mall or the Beth casino in MA. Improved market share in Macau due to better table efficiency. Continued double digit gains in Macau GGR.
Negative risks would include: War in the Middle East, aka Israel bombing Iran and it gets out of control. Conflict with Japan over disputed Islands. Psychological impact of losing double digit GGR in Macau - this year's surprise double digit gains with tough to top comparisons will make it much harder for double digit comparisons for Y/Y gains next year due to strained supporting infrastructure such as hotel rooms already filled to capacity, long waiting times at border gates and full trains and ferries that get people into Macau. Also, think 'law of big numbers' as it relates to $44B in gaming revenue this year and beating that next year with a China GDP growing at only 7.5% and how AAPL stock fell as it has good numbers but those good numbers don't meet desired comparisons. China tightens with a sharp short term painful plan to pop real estate bubble causing an overreaction as credit tightens and GDP takes a temporary hit. Sheldon dies.
Longer term, over 18 months out, looks very good with predictable money streams. There will be many positives for LVS. The bridge going from Hong Kong to Macau will be complete in 2015. That's the biggest game changer for GGR growth in Macau which is the biggest revenue driver, (until Japan). Then day trippers to Macau will sky rocket. There will not be a need for rooms, ferries and trains. Additional infrastructure will be completed. WYNN, MPEL, Galaxy and MGM properties will be in place. Light rail tourist transportation within Macau will be in place. The new ferry landing closer to Cotai Strip will be complete. All that could return GGR to double digit gains. EuroVegas will either be coming on line or cancelled, both would be ok. A new Asian resort will be in work. China's new services and consumer economy grows middle class disposable income fueling mass market driven profits in Macau. The mall in Singapore will sold for more than MBS cost. Rising dividends. Special dividends with non-core asset sales. Sheldon will be out of the picture with a successful succession plan in place making LVS a real company rather than Sheldon's toy.
What has impressed me lately has been the SAR capacity add-ons. Ever since the high speed trains into Guangzhou began, they've been consistently ordering more trains and packing them onto that rail line. Same with bordergate capacity issues.
With all the stresses and strains as everybody builds new resorts on Cotai, I don't see further approval of new gaming beyond what's already in the pipeline as a reasonable proposition, and that spells continued supply crunches and higher margins for years to come.
For example, with many, it's a foregone conclusion that Studio City will get approved for a gaming license that their original plan never applied for. With all the resorts that are opening between now and 2017 clamboring for the limited supply of future tables under the caps, I see a strong possibility that Studio City won't get that approval, particularly given that Melco already has a large presence there with it's "on-strip" mega-resort, which continues to expand.
We may find out with Studio City that it was a good thing that Sands got "formal" approval for Parisian as early as it did, because Studio City never even had the "verbal assurance" from Edmund Ho that Sands had for sites 7 and 8...
... and we all know what happened with THOSE parcels... even after $100+ million in site prep was sunk into them.
good pts, however the next few years, lvs has little competition and with the additional positive/positives it should do quite nicely.....still looking for the nineties, blitz, and with a little pullback buy your calls and join in again....it should prove to be interesting and yes rewarding. thanks for sharing as much appreciated. gltu. goos.