Las Vegas Sands Unit to Resume Parisian Macau Construction

Sands China Ltd. – a majority-owned subsidiary of Las Vegas Sands Corp. (LVS) – announced that the Chinese government has given the requisite permit to resume the construction of the casino known as the Parisian Macao. However, Sands China expected clearance for resuming construction on the $2.7 billion project, which had been stalled in June following an accident, to come in October.

Las Vegas Sands expects the Parisian Macao — its fourth property on the Cotai Strip — to open by late 2015. The property will feature roughly 3,000 rooms and suites, gaming space, a retail mall, replica Eiffel Tower, MICE space in addition to diverse food, beverage and entertainment options.

For Las Vegas Sands, Macao has historically been a sweet spot. Asia's economic growth in recent years, particularly in China, has created a sizeable middle class with significant disposable income. This new generation of gamblers drives the future growth of the Resorts & Casinos industry in Macao. Additionally, Macao is the only part of China where casino gambling is legal, and Las Vegas Sands commands a sizeable market share in the region.

The key to Las Vegas Sands’ success in Macao lies in gaining a huge chunk of the mass market. The Venetian Macau, Four Seasons Macao and Sands Cotai Central offer thousands of hotel rooms and space for mass-market gaming, which normally yield much higher margins than VIP gaming.

Recently, mass-market play has grown more quickly than VIP play which has been a boon for Las Vegas Sands over other casino-operators like MGM Resorts International (MGM) and Wynn Resorts Ltd. (WYNN).

Moreover, the resumption of construction at the Parisian Macau signals further gain for Las Vegas Sands. However, Sands China will require further permits as the construction work progresses.

However, we remain aware of the sluggish Chinese economy and the fact that high-stake gamblers are curtailing spending. Also, a nationwide crackdown on corruption in China that compelled Macao officials to impose restrictions on VIP gamblers to stop billions of dollars from being siphoned off illegally from mainland China to Macao, keeps us on the sidelines.

Las Vegas Sands carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Churchill Downs Inc. (CHDN), which has a Zacks Rank #2 (Buy).

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