Approval for 200 gaming tables in Macau gives it 27% of the Macau total. Its upcoming hotel addition gives to 40% of the room base. While these capacity increases were anticipated, we view them positively in light of our short-term and long-term bull thesis.
According to press reports, Sands China (LVS) has received official approval for 200 gaming tables in Macau. While our model already factors a 200-table increase during 1Q13, we view the official approval as a significant positive given Macau’s table cap/high-utilization rate and investor perception of Sand’s relationship with the Macau Government. LVS will now host ~27% of tables in Macau, though its GGR share in CY12 was ~19% - it has room to grow in a relatively strong year, in our view.
In addition, Sand’s Cotai Central has completed its second tower (+2,067 rooms), which pending final Government approval may open ahead of Chinese New Year, or February 10 this year. The addition leaves LVS with close to 40% of the hotel capacity in Macau. Whereas others are capacity constrained, Sands can utilize cash rooms - as opposed to holding nearly all their rooms for comps/VIP, like other operator facilities - to drive captive traffic and thus, gaming volume and hold rates.
We forecast Sands China to grow EBITDA 25% in CY13 to $2.47b.
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By KATE O'KEEFFE
Lunar New Year has come early for Las Vegas Sands Corp. LVS 0.00%The casino giant recently received the Macau government's approval to add 200 highly prized gambling tables to its properties, according to people familiar with the matter.
The news comes just weeks before the biggest holiday of the year for Asia's high rollers and could mean more than $500 million in additional annualized revenue for the casino operator. It also follows years of tight government restrictions that have complicated Sands' and other operators' expansion plans.
Neither representatives from Sands nor Macau's gambling regulator returned requests for comment.
CLSA analysts Aaron Fischer and Richard Huang said the additional tables could translate into an extra $511 million in net revenue per year for Sands assuming the real estate is allocated to mass market customers. Sands will now have 1550 tables, or 15% more than the 1350 they had before, they added.
Sands, one of six licensed casino operators in the Chinese territory, currently accounts for about 20% of the market's gambling revenue. Last year Macau's gambling revenue rose 14% from the previous year to 304.14 billion patacas ($38.1 billion).
Macau, which earns about six times the gambling revenue of the Las Vegas Strip, is a crucial market for U.S.-based casino operators battling an anemic Las Vegas. But the local government's surprise decision to impose a cap on tables a few years ago was a reminder of the regulatory risks companies face there.
In recent years government policies aimed at curbing explosive gambling growth—such as the cap on tables and a limit on the number of foreign workers businesses can bring to Macau—have presented challenges for operators eager to expand. Sands, which opened a massive, $4 billion-plus property last year, has been particularly affected by the new rules.
According to the most recent government data from the end of 2012, Macau now has 5685 gambling tables, or 20 more than the government had said it would allow under a plan that capped tables at 5,500 until 2013 and provides for a 3% annual increase thereafter.
It remains unclear how tables will be allocated in the future with all six of Macau's operators, including Sands' Las Vegas-based rivals Wynn Resorts Ltd. WYNN +1.02%and MGM Resorts International, MGM +0.23%currently planning large expansion projects.