Las Vegas Sands Kept at Neutral

We reaffirm our Neutral recommendation on
Las Vegas Sands Corp.

(
LVS

) following mixed second-quarter 2013 results. While the

company’s earnings in the second quarter beat the Zacks Consensus

Estimate, its sales missed the same.

Why the Reiteration?

On Jul 24, 2013, Las Vegas Sands posted second-quarter 2013

adjusted earnings of 72 cents per share, beating the Zacks

Consensus Estimate of 69 cents by 4.3% and the prior-year

quarter’s earnings of 51 cents by 41.2%. Strong margins boosted

the bottom line. The company’s revenues of $3.24 billion grew

25.6% year over year on the back of solid Macau as well as

Singapore business.

Overall, we remain encouraged by the company’s strong brand

portfolio and its ability to navigate through a difficult

operating environment. Apart from the U.S. and Chinese markets,

the company’s venture into new markets especially in Japan,

Korea, Taiwan and Vietnam, South America and Europe is expected

to be beneficial in the long term. 

Las Vegas Sands generates over 80% of its revenues from its

properties in Macao, the biggest and highly profitable gaming

destination in the world. We remain hopeful about the increase in

demand and the flourishing mass market segment in Macao.

After a few weak quarters, the company’s business at Marina

Bay Sands, Singapore appears to be improving. The company is also

witnessing solid growth in its mass market business in the

region, driven by new marketing programs.

Las Vegas Sands is currently developing the Sands Cotai

Central resort project at Cotai Strip in Macao. Since the opening

of the projects’ phase I and phase II operations, it has

witnessed huge footfall. Gaining from growing gaming businesses

and increased non-gaming operations, Sands Cotai generated solid

revenues in the past four quarters. Considering such higher

revenue gains, the company has decided to commence the third

phase of the project that will cost around $450 million.

Following the completion of the Sands Cotai Central project, it

is expected to provide more of a draw for the destination

visitors.

Despite such positives, we remained concerned about the Zacks

Rank #3 (Hold) company’s high debt level. In the recently

concluded second quarter, the company’s revenues missed the

ZacksConsensus Estimate by 1.5%, which is a major cause of

concern.  

We also remain skeptical about Las Vegas Sands’ European

integrated resort project – EuroVegas – in Madrid, Spain as the

successful completion of the project is subject to many terms and

conditions of the government.

Moreover, highly competitive markets of Las Vegas and Macao

have added to the woes. The company’s upcoming project at Cotai

Strip will face extreme peer pressure from several Chinese casino

operators and other U.S.-based companies. The excess supply,

especially in the Macao market, might reduce the company’s market

share.

Though the company’s Las Vegas business is improving lately,

we prefer to remain on the sidelines until a complete recovery in

the situation takes place.

Other Stocks to Consider

Some other companies from the gaming industry that are worth

considering at the current level include
Monarch Casino Resort Inc.

(
MCRI

),
Multimedia Games Inc.

(
MGAM

) and
Pinnacle Entertainment Inc.

(
PNK

). All these stocks carry a Zacks Rank #1 (Strong Buy).

LAS VEGAS SANDS (LVS): Free Stock Analysis

Report

MONARCH CASINO (MCRI): Free Stock Analysis

Report

MULTIMEDIA GAME (MGAM): Free Stock Analysis

Report

PINNACLE ENTRTN (PNK): Free Stock Analysis

Report

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Las Vegas Sands Kept at Neutral

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