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Las Vegas Sands Corp. Message Board

  • bjspokanimal bjspokanimal Feb 25, 2013 2:35 PM Flag

    EPS Is What Is Holding LVS Back


    Ever since the ramp up of Marina bay took LVS to $55 a share in November of 2010, the stock has been range-bound between $38 and $60. Although everybody has their own perception of why a "growth" stock like this might stall out... especially as LVS has improved it's credit rating and begun paying a hefty dividend during the period, I have MOHO on this as well.

    The highlight of 2011 was not only a hangover from the euphoria of Marina Bay's extraordinary profit ramp, but it was marred by a steady slide in Macau market share for Sands that saw it tumble from almost 24% share in the spring of 2010 to as low as 15% by early fall 2011. The main issue there was the bad relations with junket operators that Steve Jacobs left the company with. It wasn't all Jacobs... the company had sanctioned a push toward "direct VIP" that had compelled junkets to direct traffic elsewhere given that direct VIP was in direct competition to their efforts, but Jacobs took it to an acrimonious extreme and alienated the company with many junkets.

    By early 2011, Sands had begun it's $150 million "junket initiative" and by june of that year, a number of junkets were speaking highly of those efforts as they signed up for new junket rooms that were being remodeled to their specifications. By late 2011, word was that those accomodations were substantially over-subscribed and early last year, the initial results of that effort was marked by a 70% surge in 4-season's revenues as the resort opened the first of the remodeled suites.

    Still, even as market share steadily improved going into 2012, the Chinese slowdown was evident at marina bay as Vegas operations remained plateaued. Cotai central opened phase 1 last april, but with fewer gaming tables than similar resorts had been alotted. Cotai central also piled pre-opening expenses for phase 2 up against phase 1's fledgling revenue stream and the 2012 ramp of C.C. remained only marginally profitable.

    My point in this playscript of events is that LVS is indeed growing and addressing problem areas assertively but the profits as measured by EPS have not been very evident as one fix, like the market share improvement, is weighed down by the next issue, like the chinese slowdown. Q4 was looking to be pretty good even without the 200 new gaming tables that wouldn't be available until early this year, but a near record low hold percentage at MBS combined with several quarters of tax expenses that were all crammed into Q4 to mitigate MBS's extraordinary surge in VIP volumes.

    Sure, many of us look at LVS's many coiled springs of future growth. Sky bridges, high-speed trains, MBS's VIP volume surge, the ramp up of all of Cotai Central, new tables, the shift of patronage to Cotai, even City of Dream's business surge that's being attributed to a coat-tail effect from Cotai Central. We can see it, but the casual "stock screener" doesn't necessarily see it.

    What HE sees is a P/E that's almost 3 times that of Apple and an earnings growth rate that doesn't lend itself to supporting such a P/E on a trailing basis. They need more... even if it's just better hold. Otherwise, all the good news short of an EPS surge is probably going to keep this puppy under $60 indefiinately.

    Hopefully, 2013 is the year that many stars come into alignment and allow all of LVS's growth to flow to the bottom line and lift the stock off of the 27 month base that it's been building. It's trying to the patience of those of us who still see the value in this company... even if it IS relative to an S&P index that's trading above 1500.


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    • Feb 26, 2013 1:58 PM Flag

      This is another 5 star post, thank you, I particularly liked your statement about, "LVS's many coiled springs of future growth."

      And, I would like to add that The Parisian adds yet another significant growth spring.

      Aside from The Parisian resonating with the market (even I'm impressed with its architecture/design), as it is physically positioned it will bisect Mpel's COD and Studio City, so we'll capture all their foot traffic as I can't imagine Mpel coming up with a design for Studio City that could keep its guests from crossing the street to experience The Parisian.

      Sure, one might argue (I know this is a straw man argument) that Mpel will provide incentives for their guests to visit their other property, but how could anyone possibly just walk past the Venetian, Four Seasons, The Parisian or Sands Contai Central with it's two casinos, Pacifica and Himalaya and all that shopping?

      While a bit of a stretch (no pun intended) even the expanded Galaxy creates a perfect triangle with LVS Cotai bounded by Studio City, COD and Galaxy.


      Sentiment: Strong Buy

    • I think you can throw in the growing but now level share count. That was killing EPS for a while, then as you mentioned, low hold one quarter, high capex the next. Compared to EBITDA the debt is very reasonable at ~2x TTM EBITDA but I think many see that as a negative too. That would be taken care of in one swoop with sale of non core assets but the market gives LVS no credit for this.

      The div and the special div have made all of this much more palatable, otherwise I can see why many shareholders have bailed. The REIT/monitization of non core assets idea/possibility/etc maybe what causes the next leg up. Selling non core assets would assuredly do that but that does not appear to be in the immediate future unfortunately.

      • 3 Replies to orthokneepa
      • Good point, ortho. There was much dilution involved until recent quarters. Few stock screeners generally screen for profits and EBITDA ahead of EPS, and such dilution would impact EPS. Depreciation does as well, even though LVS's non-U.S. resorts are arguably appreciating greatly as the company increasingly considers non-core asset sales in those locales.

        There's so much that EPS doesn't take into account that those who see good value in LVS do take into account. It's like being a 40-year veteran in finance and economics and trying to figure out why so many 20-somethings wouldn't look beyond Obama's appearance with Justin Bieber before deciding that he was "hip" enough to do 4 more years like the last 4.

      • It will be interesting to see what 200 new tables, all those new rooms for CNY and a better MBS does for earnings. Analysts have been increasing their estimates as of late.

      • It certainly does not help EPS when total shares outstanding keeps growing. That 50,000 shares here and 50,000 shares there, to pay Leven and others, adds up after a while...

50.76+0.40(+0.79%)Aug 25 4:02 PMEDT