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Las Vegas Sands Corp. Message Board

  • abcsurfnet abcsurfnet Feb 1, 2013 1:42 PM Flag

    Morningstar - LVS Shares Moderately Undervalued - Fair Value $65.00

    Las Vegas Sands Reports Strong Fourth-Quarter Results; Shares Moderately Undervalued.

    Fair Value: $65.00
    Consider Sell: $113.75

    Analyst Note Jan. 30, 2013

    Las Vegas Sands LVS reported strong fourth-quarter results in line with our expectations, driven by strong performance by Sands China and offset by weak results in Singapore and Las Vegas. Revenue increased 20.9% to $3.08 billion (compared to consensus of $3.01 billion) and adjusted property EBITDA increased 4.4% to $1 billion (above consensus of $980 million). On a hold-adjusted basis, adjusted property EBITDA increased by 17.6%. The company announced a 40% increase in its quarterly dividend to $0.35, providing investors with a relatively attractive dividend yield of 2.7%. Sands continued to increase its market share in China in the fourth quarter, and we expect the company to
    continue to gain share in 2013, due to the continued ramp-up of its new Sands Cotai Central casino, and its focus on the mass-market gaming market, which we expect to grow by over 25% in 2013, compared to single-digit growth for the VIP market. The fourth-quarter results did not cause us to
    make any change to our fair value estimate of $65 per share, and we currently view Las Vegas Sands as moderately undervalued, with the stock trading at an approximately 20% discount to our fair value estimate, and at a current year free cash flow yield of 6.8%.

    Revenue for Sands China increased 48.1% to $1.97 billion and adjusted property EBITDA increased 44.1% to $619.8 million. The increase in revenue was significantly higher than industry revenue growth of 13.5%, as the opening of the new Sands Cotai Central casino enabled the company to increase its market share in Macau to 21.1% in the fourth quarter, compared to 15.5% in the year-earlier quarter. Sands Cotai Central performed above our expectations, with mass market
    table drop and VIP rolling chip drop increasing sequentially from the third quarter by 72% and 12.3%, respectively. We expect Sands Cotai Central to continue to take market share in 2013, with the company receiving government approval earlier this week for 200 additional gaming tables, increasing
    total gaming tables at the property to over 550 tables, and the opening this week of a 2,067-room Sheraton hotel tower. We expect the new gaming tables and new hotel tower to generate over $400 million in incremental annual revenue for the company in 2013. With the new gaming tables at Sands
    Cotai Central, LVS now controls 27.2% of the gaming tables in Macau and our current outlook is for Sands China to increase market share in China to over 25% by the end of 2013.

    Revenue for the company's Marina Bay Sands casino in Singapore decreased 11.1% to $717.2 million and adjusted property EBITDA decreased 29.1% to $302.5 million. The decrease in revenue was due to an abnormally low VIP rolling chip win rate of 2.14% (below the expected range of
    2.7% to 3.0%). On a hold adjusted basis, revenue increased by 3.4% and adjusted property EBITDA decreased by 1.8%. VIP rolling chip volume increased by 53%, in sharp contrast to the third quarter, when VIP rolling chip volume decreased by 29.5%. We attribute the volatility in MBS’ VIP rolling chip
    volume to the VIP market in Singapore being concentrated among a limited number of VIP customers relative to the China market. We expect Marina Bay Sands to continue to experience volatility in its VIP business in 2013, and we currently lack visibility for revenue and EBITDA for the property in 2013. In our view, the lack of visibility for revenue and EBITDA could lead the company to beat or miss
    consensus quarterly earnings estimates in 2013 by a wide margin.

    Revenue for the company’s Las Vegas casino operations decreased by 9.2% to $308.3 million and adjusted property EBITDA decreased 34.7% to $52.8 million. The decrease in revenue was driven by a decrease in table drop of 13.7%, and a decrease in slot handle of 0.7%. RevPAR for the company’s hotel operations increased by only 1.7%. We expect Las Vegas to continue to perform poorly in the first quarter of 2013, with the increase in the payroll tax and increased marginal tax rates for high-income consumers weighing on gambling spend per trip.

    Sentiment: Strong Buy

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