A Mixed 4Q for Las Vegas Sands

Zacks

Leading international developer of multi-use integrated resorts, Las Vegas Sands Corp. (LVS) recently reported fourth quarter 2012 adjusted earnings of 54 cents per share; below the Zacks Consensus Estimate of 59 cents and the year-ago quarter’s earnings of 57 cents per share.

The earnings in the quarter have declined with the rise of net income, attributable to non-controlling interests. However, it was partly neutralized by the company’s high operating income.

On a GAAP basis, the company reported a net income of $434.8 million or 53 cents per share in the fourth quarter 2012 compared with $320.1 million or 39 cents per share in the year-ago quarter.

For full year 2012, the company reported an adjusted net income of $1.77 billion or $2.14 per share compared with $1.64 billion or $2.02 per share in the prior-year period. Reported earnings for 2012 were below the Zacks Consensus Estimate of $2.22.

Quarterly net revenues climbed up 20.9% year over year to $3.08 billion, which was ahead the Zacks Consensus Estimate of $2.99 billion. Consolidated adjusted property EBITDA (earnings before interest, taxes, depreciation and amortization) surged 4.4% year over year to $1.0 billion.

The significant upside in quarterly results was attributable to the company’s strong Macau business. In 2012, net sales were $11.13 billion, up 18.3% year over year but below the Zacks Consensus Estimate of $12.7 billion. Consolidated adjusted property EBITDA surged 7.3% to $3.8 billion, which was a record for the company.

Macao Businesses

Adjusted Property EBITDA in Macao recorded at $622.2 Million, which witnessed an increase of 43.3% year over year owing to the high gaming volumes in the region.

Las Vegas Sands’ integrated resort properties and other assets in Macao are owned and operated by Sands China Ltd., which is a majority-owned subsidiary of the company. During the quarter, net revenue at Sands China was $1.97 billion, jumped 48.1% year over year. Adjusted property EBITDA amounted to $619.9 million, up by a massive 44.1% from the year earlier quarter.

Net revenue increased 10.3% to $843.0 million at The Venetian Macao, driven by higher than anticipated Rolling Chip win of 3.25% whereas Sands Macao revenues were down 2.0% to $314.6 million. Moreover, revenues at Four Seasons Hotel Macao and Plaza Casino surged 36.9% to $296.2 million. Net revenue at Sands Cotai Central, the first phase of which was opened on April 11, 2012, was $490.7 million.

Revenue per Available Room (RevPAR) fell 1.3% and 2.0%, respectively, at Venetian Macao and Sands Macao, but leaped 21.3% at Four Seasons Hotel Macao and Plaza Casino.

We believe facilities of Sands Cotai will drive additional visitation in Macao and will further boost Las Vegas’ market share in Macao with its high gaming potential. The property witnessed a footfall of nearly 3 million during the fourth quarter.

Las Vegas Businesses

Net revenues from the Las Vegas’ operations, comprising The Venetian Las Vegas and The Palazzo, plunged 9.2% year over year to $308.3 million. The decline in revenue was due to the fall in the percentage of table games play and casino revenue. Adjusted property EBITDA declined 34.7% to $52.8 million.

Marina Bay Sands in Singapore

Revenue at Marina Bay Sands, which made its debut in April 2010, dropped 11.1% to $717.2 million during the fourth quarter of 2012. The decline in revenue was due to a lower Rolling Chip win. Adjusted property EBITDA declined 29.1% to $302.5 million. However, the Marina Bay Sands enjoyed RevPAR growth of 10%, driven by higher occupancy and average daily rate.

Sands Bethlehem

Sands Bethlehem in Bethlehem, Pennsylvania opened the first phase of its facilities for business on May 22, 2009.  Net revenue at Sands Bethlehem was $117.8.0 million in fourth quarter, up 12.2% year over year. Adjusted property EBITDA increased 22.2% to $27.5 million.

Liquidity
At end of the reported quarter, the company had $2.51 billion in unrestricted cash balance. Total debt outstanding, including the current portion, amounted to $10.23 billion. The company has scheduled principal payment requirements of $97.8 million for 2013.

Dividend

During the fourth-quarter 2012, a special dividend of $2.75 per share and a recurring dividend of 25 cents per share were paid by the company.

The company also raised its quarterly dividend by 40% to 35 cents per share. The increased dividend will be paid from the beginning of the first quarter of 2013.

Our Take

The company reported lower-than-expected results due to weak business in Singapore and Las Vegas. However, we remain bullish regarding the growth prospects of Macau business.

Las Vegas currently holds a Zacks Rank #2 (Buy). Moving ahead, other casino companies, which are expected to perform well, include Melco Crown Entertainment Limited (MPEL), MGM Resorts International (MGM) and MTR Gaming Group, Inc. (MNTG). Melco Crown carries a Zacks Rank #1 (Strong Buy), whereas MGM Resorts and MTR Gaming carry a Zacks Rank #2 (Buy).

Read the Full Research Report on LVS

Read the Full Research Report on MGM

Read the Full Research Report on MNTG

Read the Full Research Report on MPEL

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