Las Vegas Sands Corp. (NYSE:LVS) operates five integrated resorts in Macau and the Marina Bay Sands in Singapore. That gives it a commanding presence in the Asian gaming market, one analysts expect the company will retain for years to come.
A team of Bernstein analysts notes that in Macau, the company’s guestroom stock in a market where that supply is constrained, coupled with its ability to lure mass and premium mass market gamblers, position it to be the king of the peninsula for years to come.
In Macau, Sands controls approximately one-third of the hotel room inventory,” said the Bernstein analysts in a note. “With Macau gaming being a supply-driven (and hotel room supply constrained) market, Sands has developed a strong foothold in the mass market segment.”
LVS’ most recent batch of financial results confirm the importance of the firm’s Asian footprint for investors. In the July through September period, the operator of the Plaza Macao, Sands Macao, and Venetian Macao notched adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.28 billion across its eight properties, but just $93 million of that sum was generated by the Palazzo and Venetian on the Las Vegas Strip.
LVS, which also runs the Parisian and Sands Cotai Central, is less reliant on the volatile VIP segment in Macau, and has proven proficient at generating significant non-gaming revenue there. For every dollar in profit the company generates there, about 90 cents is attributable to mass market gamblers or non-gaming revenue.
The company is expanding its non-gaming offerings, something Beijing wants operators to do in an effort to reduce Macau’s economic dependence on casinos. In a presentation following its third-quarter earnings report, Sands reminded analysts and investors that it’s spending $2.2 billion to increase premium suite capacity on the peninsula by two million square feet.
“When the redevelopment is complete, Sands will stand to benefit from the expected growth in premium mass gaming segment in Macau,” said the Bernstein analysts.
Other Asia Efforts
At the Marina Bay Sands in Singapore, the company is planning a $3.3 billion expansion, including the addition of a fourth hotel tower, that analysts expect will cement LVS’ lead over Genting Singapore, the other operator in the city-state.
The Bernstein analysts said the Marina Bay Sands expansion will bolster the LVS position ahead of Genting in terms of room capacity, slot machines, and table games.
As has been widely noted, Sands is one of the frontrunners to land one of the first three Japan gaming licenses, a status attained due in large part to the company’s established success in Asia. The company, which is focusing its efforts there on Tokyo and Yokohama, expects a Japanese integrated resort could cost $10 billion to $12 billion to build.
LVS executives said they’re targeting a 20 percent return on investment in Japan, which is attainable because analysts expect the gaming market there will eventually be larger than Singapore’s and trail only Macau and Las Vegas on an international basis.