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Las Vegas' EPS In Line, Revs Beat

Zacks Equity Research

Following two successive quarters of beat, Las Vegas, Nevada-based Las Vegas Sands Corp. (NYSE:LVS - News) posted in line results for the fourth quarter of 2011. The company reported adjusted earnings of 57 cents per share in the fourth quarter of 2011, exactly matching the Zacks Consensus Estimate, but surging 35.7% from the year-ago quarter earnings of 42 cents.

On a GAAP basis, the company reported a net income of $320.1 million or 39 cents per share compared with $273.0 million or 34 cent per share in the year-ago quarter. The improvement primarily reflects a rise in operating income, partially offset by higher net income attributable to non-controlling interests (primarily Sands China Ltd.) and preferred stock inducement, repurchase and redemption premiums.

Quarterly net revenue climbed 26.3% year over year to $2.54 billion, outperforming the Zacks Consensus Estimate of $2.44 billion. Consolidated adjusted property EBITDA (earnings before interest, taxes, depreciation and amortization) shot up 30.0% year over year to $960.6 million.

The significant upside in quarterly results was attributable to strong Macau business, outstanding performance in Singapore and improved Las Vegas business.   

For full year 2011, the casino operator reported an adjusted net income of $1.64 billion or $2.02 per share compared with $775.0 million or 98 cents per share in the prior-year period. For 2011, net sales rose 37.3% to $9.41 billion.

Macau Businesses

Las Vegas Sands’ integrated resort properties and other assets in Macau are owned and operated by Sands China Ltd., which is a majority-owned subsidiary of the company. Net revenue at Sands China jumped 22.0% year over year to $1.33 billion during the quarter. Adjusted property EBITDA perked up 29.2% to $430.1 million during the quarter.

Net revenue increased 15.5% year over year to $764.3 million at The Venetian Macau, while Sands Macau earned revenues of $321.0 million, up 0.5%. Moreover, revenues at  Four Seasons Hotel Macau and Plaza Casino soared 135.7% to $216.4 million, driven by strong visitation and growth in Macau.

Revenue per Available Room (RevPar) improved in all the three properties; Venetian Macau, Four Seasons Hotel Macau and Plaza Casino and Sands Macau.

Macau, the only Chinese city where gambling is legal, is experiencing higher gaming volume due to gaming-friendly policies of the local government. The performance at Macau is also driven by margin growth at mass table and slot businesses, along with the contribution from non-gaming amenities. Las Vegas is also set to open its latest Integrated Resort offering, Sands Cotai Central within eight weeks, and this, we believe will further expand its operations in Macau.

Las Vegas Businesses

Net revenue from the Las Vegas operations, which consist of The Venetian Las Vegas and The Palazzo, leaped 9.3% year over year to $339.5 million. The upside in revenue was driven by stronger group meeting and convention business and higher food and beverage revenue. Adjusted property EBITDA inched up slightly to $80.9 million. The company’s Las Vegas business is improving as it continues to focus on cash revenues to drive visits and is significantly cutting back on compensation allotment and other promotions. Management also remains encouraged as convention bookings continue to improve.

MarinaBay Sands in Singapore

Marina Bay Sands, which debuted in April 2010, earned revenues of $806.9 million during the fourth quarter of 2011, up 44.0% year over year. The revenue growth was driven by robust VIP, mass gaming and slot volumes coupled with strong visitation from all over Asia and higher revenue streams from non-gaming facilities. Adjusted property EBITDA rose 39.6% to $426.9 million.

Singaporeis poised to grow as the surrounding areas have a high propensity to gamble and further development in transport infrastructure will drive more tourists.

Balance Sheet

At end of 2011, the company had $3.90 billion in unrestricted cash balance. Total debt outstanding, including the current portion, was $10.03 billion. The company has scheduled principal payment requirements for 2012 and 2013 of $455.8 million and $530.0 million, respectively.

Our Take

We believe that the company is on track to deliver solid results. We remain bullish regarding the growth prospects at Macau and Marina Bay Sands in Singapore is a significant catalyst for the company. We expect the company’s Asian operations to significantly support its earnings growth in the coming quarters. Las Vegas also hopes to buy more land in Singapore and expand its casino there by building additional 1,000 to 1,500 rooms.

The company reported better-than-expected results, which will likely drive the estimates going forward. Las Vegas Sands also remains optimistic regarding the introduction of its integrated resort offering, Sands Cotai Central on the Cotai Strip in eight weeks, which will further drive visits in Macau.

The company holds a Zacks #2 Rank, which translates into a 'Buy' rating over the short term. We also maintain our long-tern "Neutral" recommendation on the stock.

One of Las Vegas Sands' primary competitors MGM Resorts International (NYSE:MGM - News) will report its fourth quarter earnings on February 22, 2012.

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