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WIKI ANALYSIS
Las Vegas Sands (NYSE:LVS) is a company that runs resort casinos in Las Vegas, Nevada and Macao, China.[1] In Las Vegas, it owns The Venetian Resort Hotel Casino, The Palazzo Resort Hotel Casino, and The Sands Expo and Convention Center.[2] Its newer properties are in Macao and include the Sands Macao, The Venetian Macao Resort Hotel, and the Four Seasons Hotel Macao.[2]
While the company's flagship property, The Venetian, is in Las Vegas, less than a third of LVS's total revenues came from Las Vegas by 2008.[3] Macao gaming industry revenues increased every year for a decade until 2007 but fell in 2008;[4] in January 2009, those revenues had dropped more than 30% from their levels in January 2008.[4] Nevertheless, Las Vegas Sands's three Macao properties generated 69.6% of total revenues during 2008.[3]
Planning to expand beyond its established Las Vegas and Macao markets, LVS is developing the Marina Bay Sands in Singapore[1] and plans to open the Sands Bethworks in Bethlehem, Pennsylvania on May 22, 2009.[5] As a result, the company had accumulated over $10 billion in debt by March 2009.[6] After incurring a net loss of $164 million in 2008,[7] LVS has set aside $3 billion in cash reserves as a cushion for its debt obligations.[6]
Business Overview
Las Vegas Sands owns and operates casino resorts and conference centers in Las Vegas, Nevada, and Macao, China.[1] The company plans to expand by creating what it calls the "Cotai Strip" in Macao, an integrated group of resort properties anchored by its Venetian Macao;[1] additionally, it is developing the Marina Bay Sands resort in Singapore and the Sands Bethworks resort in Bethlehem, Pennsylvania.[1] In 2008, only 30% of the company's revenues came from its properties in Las Vegas[3] after a 193% increase in The Venetian Macao's casino revenues and a 217% increase in its room revenues from 2007 to 2008[8] made it the most lucrative property LVS owns.[3]
Business & Financial Metrics
| 2006 | 2007 | 2008 | |
| Operating Revenue ($millions) | 2,340[9] | 3,104[7] | 4,735[7] |
| Operating Costs ($millions) | 1,663[9] | 2,621[7] | 4,226[7] |
| Net Income ($millions) | 443[9] | 117[7] | (164)[7] |
| Total Assets ($millions) | 7,126,458[10] | 11,466,517[11] | 17,144,113[11] |
| Total Liabilities ($millions) | 5,051,304[10] | 9,206,243[11] | 12,403,716[11] |
While Las Vegas Sands has sustained significant revenue growth through 2008, its net income of $117 million in 2007 dropped to a net loss of $164 million in 2008.[7] The slide from black to red in 2008 was primarily attributable to a 61.2% increase in operating expenses while total revenues increased only 40.9%;[7] additionally, LVS paid out $229.7 million in interest expenses during 2008[12] accompanying a $3.2 billion increase in the company's total liabilities.[11]
With the opening of the Four Seasons Macao in August 2008,[13] Las Vegas Sands was able to stave off the decline in operating revenue that can be observed in other companies in the industry, such as Wynn Resorts (WYNN), relative to 2Q08. In the second quarter of 2009, LVS reported operating revenue down 4.8%, with casino revenues down 0.77%; however, the new property also led to operating expenses rising by 18.4% in 2Q09 compared to 2Q08.[14] Overall, this led to a decline in net income by over $213 million, and the company reported a $222.25 million net loss.[14] Moreover, Revenue Per Available Room (RevPAR) fell by 21.4% and 15.0% in Las Vegas casinos and The Venetian Macao, respectively, as the recession led to less travel and gambling.[14] Despite the boost to revenue, the Four Seasons Macao had an occupancy rate of only 44.5% for 2Q09, though the average daily rate for the hotel was $90 more expensive, at $291.[14]
In 3Q09, Las Vegas Sands' adjusted property EBITDA fell by 52.9% for its Las Vegas operations, while the Venetian Macau reported a record adjusted property EBITDA of $150.4 million, despite the Chinese government's restrictions on travel to the region.[15]
Business Segments
Las Vegas Properties (30.4% of total revenues)[3]
| 2007 | 2008 | |
| Total Room Revenues ($thousands) [8] | 362,404 | 535,797 |
| Average Daily Room Rate [8] | $258 | $232 |
| Occupancy Rate [8] | 98.4% | 91.3% |
| Revenue Per Available Room (RevPAR) [8] | $254 | $212 |
| Total Casino Revenues ($thousands) [17] | 404,254 | 522,437 |
LVS's Las Vegas properties are the company's original resort ventures and include The Venetian Las Vegas, Sands Expo Center, and The Palazzo.[1] The Venetian property has 4,027 suites, a casino with approximately 120,000 square feet of gaming space, a "Paiza Club" for customers with large deposits, and a 440,000 square foot retail, dining and entertainment complex called "The Grand Canal Shoppes."[18] The Palazzo is situated north of The Venetian and has about 105,000 square feet of gaming space, 3,066 suites, a Paiza Club for VIPs, and the 400,000 square foot "Shoppes at the Palazzo."[18] The Sands Expo Center is one of the largest trade show and convention facilities in the United States with 1.2 million gross square feet of exhibit and meeting space.[18] LVS also operates a 1.1 million gross square foot meeting and conference facility that links the Expo Center with The Venetian and The Palazzo, bringing the company's total exhibition and meeting facilities to 2.3 million square feet.[18] Approximately 1.3 million people visited LVS's Las Vegas meeting and conference facilities in 2008.[18]
Sands Macao (23.5% of total revenues)[3]
| 2007 | 2008 | |
| Total Casino Revenues ($thousands) | 1,296,869 | 1,013,063 |
| Rolling Chip Volume | 26,325,271 | 25,182,225 |
The Sands Macao is the first Las Vegas-style casino to open in Macao and is situated on the waterfront near the Macao-Hong Kong Ferry Terminal;[18] this location provides the Sands Macao with direct access to approximately 9.7 million visitors who arrived in Macao by ferry during 2008.[18] The property includes 229,000 square feet of gaming space,[18] a 289-suite hotel tower, a Paiza Club, and a theater.[19]
The Venetian Macao (44.3% of total revenues)[3]
| 2007 | 2008 | |
| Total Room Revenues ($thousands) [8] | 63,378 | 200,594 |
| Average Daily Room Rate [8] | $221 | $226 |
| Occupancy Rate [8] | 85.7% | 85.3% |
| Revenue Per Available Room (RevPAR) [8] | $190 | $193 |
| Total Casino Revenues ($thousands) [17] | 549,298 | 1,610,505 |
| Rolling Chip Volume [17] | 17,071,475 | 36,893,831 |
The Venetian Macao is LVS's "anchor property" in Macao and is located about two miles away from the Taipa Temporary Ferry Terminal on Macao’s Taipa Island.[19] The property includes about 550,000 square feet of gaming space, a 39-floor luxury hotel tower with more than 2,900 suites, approximately 1.0 million square feet of retail and dining facilities, a 1.2 million square foot convention center and meeting room complex, a 15,000-seat arena, and a 1,800-seat theater hosting the Cirque Du Soleil production "Zaia."[19]
Four Seasons Macao (14.2% of total revenues)[3]
| 2008 | |
| Total Room Revenues ($thousands) [8] | 3,664 |
| Average Daily Room Rate [8] | $344 |
| Occupancy Rate [8] | 32.0% |
| Revenue Per Available Room (RevPAR) [8] | $110 |
| Total Casino Revenues ($thousands) [17] | 46,094 |
| Rolling Chip Volume [17] | 630,088 |
Opened in August 2008, the Four Seasons Macao stands adjacent to The Venetian Macao.[19] The property features 360 rooms and suites managed by Four Seasons, about 70,000 square feet of gaming space, food and beverage facilities, conference and banquet facilities, and about 211,000 square feet of retail shops connected to the mall at The Venetian Macao.[19] LVS expects to spend $360 million to add nineteen Paiza mansions and Four Seasons-branded apartments to the site.[19]
Other Asia Segment (3.9% of total revenues)[3]
This segment consists primarily of LVS's passenger ferry services in Macao and is not a significant source of income.[1]
Trends & Forces
LVS has big exposure to the Macao gaming market
In 2008, 69.6% of LVS's total revenues came from Macao;[3] The Venetian Macao alone produced $1.9 billion in revenues during 2008 while the company's Las Vegas properties produced only $1.3 billion that year.[3] The Macao gaming market is largely dependent on the Chinese market and economy and, while Macao gaming industry revenues had increased every single year for nearly a decade into 2007, gaming revenues for the region decreased in 2008.[4] Furthermore, industry revenues in January 2009 dropped 30 percent from January 2008 as the global economic crisis affected Asian gamblers.[4] LVS is committed to Macao market exposure with its "Cotai Strip" development in the works[1] - if the market continues to worsen, Las Vegas Sands could see its bottom line affected accordingly.
Despite economic slowdown, LVS is expanding
LVS is building new resorts[1] in Singapore (called Marina Bay Sands) and Bethlehem, Pennsylvania (called Sands Bethworks, slated to open on May 22, 2009[5]) despite a slumping casino industry causing companies like Riviera Holdings to default on their credit lines.[21] Because LVS has already begun construction on these resorts, the company cannot cut the casinos' funding even as it laid off over 11,000 of its staff by the end of 2008 to cut costs.[22] As a result, the company has accumulated heavy debt.
Heavy debt on the balance sheet
In March 2009, LVS had over $10 billion in debt from financing aggressive growth projects.[6] The company has about $3 billion in cash to cushion upcoming debt obligations but LVS's expansion investments occurred at the beginning of a global recession.[6] At the end of 2008, the LVS's assets were valued at $17.1 billion, over 38% more than its $12.4 billion in liabilities.[11]
Macao government regulation and gaming laws are relatively new
Macao's gaming laws and gaming taxes are relatively young and have few precedents, making them quite vulnerable to sudden change. China has a large and affluent middle class, but for many years travel and currency restrictions made it difficult and undesirable for visitors to come to Macao. The Chinese government relaxed many of these restrictions in 2002 when it first granted gaming licenses and ended its state-run gaming monopoly;[23] as a result, the Macao gaming market grew to generate over $928 million in revenues during January 2009.[4]
Competition
Las Vegas Sands faces intense competition in both Las Vegas and Macao. The company’s primary competitors in both markets include Wynn Resorts and MGM Mirage, both of which operate in the Las Vegas and Macao markets. LVS also faces competition from privately-held Harrah’s Entertainment, Boyd Gaming, and Native American casinos.
- Wynn Resorts: Develops luxury casino resorts and operates the Wynn Las Vegas, Encore at Wynn Las Vegas, and Wynn Macau.[24]
- MGM Mirage: Operates casino resorts, golf courses, and golf clubs in the United States.[25] MGM has a strategic alliance with the Mashantucket Pequot Tribal Nation, owner of Foxwoods Casino Resort in Ledyard, Connecticut.[25]
- Boyd Gaming: Owns and operates casinos in Nevada, Illinois, Louisiana, Mississippi, Indiana, and New Jersey in addition to pari-mutuel jai alai facility in Florida, two travel agencies, and an insurance company.[26]
- Harrah's Entertainment: A gaming company that owns and operates under the Harrah's, Caesars and Horseshoe brand names.[27] It also owns the London Clubs International family of casinos and the World Series of Poker.[27] The company was purchased and taken private on January 28, 2008.[27]
| Number of Properties | Occupancy | RevPAR | Total Revenue ($millions) | Net Income ($millions) | |
|---|---|---|---|---|---|
| Las Vegas Sands (LVS)[28] | 6[2] | 91.3%[8] / 85.3%[8] | $212[8] / $193[8] | 522[8] / 1,611[8] | (164)[7] |
| Wynn Resorts (WYNN)[29] | 3[30] | 91.8%[31] / 87.3%[31] | $265[31] / $240[31] | 2,987[32] | 210[32] |
| MGM Mirage (MGM) | 20[33] | 93%[34][35] | Unavailable | 7,209[36] | 855[36] |
| Boyd Gaming (BYD) | 15[26] | 89.2%[37][38] | Unavailable | 1,781[39] | (223)[39] |
References
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 LVS 2008 10-K pg. 1
- ↑ 2.0 2.1 2.2 Profile: Las Vegas Sands Corp.. Yahoo! Finance.
- ↑ 3.00 3.01 3.02 3.03 3.04 3.05 3.06 3.07 3.08 3.09 3.10 LVS 2008 10-K pg. 119
- ↑ 4.0 4.1 4.2 4.3 4.4 Kari Jensen (February 9, 2009). Macau Gaming Revenue Falls 30 Percent in January. VOANews.
- ↑ 5.0 5.1 Press Release (March 3, 2009). Sands Casino Resort Bethlehem to Open Its Doors on May 22. Yahoo! Finance.
- ↑ 6.0 6.1 6.2 6.3 Las Vegas Sands Gamble Might Pay Off - Bernstein. Seeking Alpha (March 13, 2009).
- ↑ 7.0 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 LVS 2008 10-K pg. Condensed Consolidated Statements of Operations
- ↑ 8.00 8.01 8.02 8.03 8.04 8.05 8.06 8.07 8.08 8.09 8.10 8.11 8.12 8.13 8.14 8.15 8.16 8.17 8.18 LVS 2008 10-K pg. 51
- ↑ 9.0 9.1 9.2 LVS 2007 10-K pg. 65
- ↑ 10.0 10.1 LVS 2007 10-K pg. 64
- ↑ 11.0 11.1 11.2 11.3 11.4 11.5 LVS 2008 10-K pg. 73
- ↑ Press Release (February 11, 2009). Las Vegas Sands Corp. Reports Fourth Quarter and Full Year 2008 Results. Las Vegas Sands Corp..
- ↑ Fours Seasons Macao Press Kit
- ↑ 14.0 14.1 14.2 14.3 LVS 2Q09 10-Q
- ↑ LVS 2009 3Q 8-K
- ↑ The Last Futurist (September 20, 2007). Places to Do: the Rest is still Unwritten Edition.
- ↑ 17.0 17.1 17.2 17.3 17.4 17.5 LVS 2008 10-K pg. 50
- ↑ 18.0 18.1 18.2 18.3 18.4 18.5 18.6 18.7 LVS 2008 10-K pg. 2
- ↑ 19.0 19.1 19.2 19.3 19.4 19.5 LVS 2008 10-K pg. 3
- ↑ Hong Kong/Macau food craze!. beauty that lies beneath.
- ↑ KVBC-TV (March 9, 2009). Vegas Strip suffering casino slump. MSNBC.
- ↑ Klaus Kneale (March 17, 2009). Layoff Tracker. Forbes.com. Retrieved on March 19, 2009.
- ↑ MacauCasinoWorld.com: History.
- ↑ Wynn Resorts Ltd.: Profile. Yahoo! Finance.
- ↑ 25.0 25.1 MGM Mirage Profile. Yahoo! Finance.
- ↑ 26.0 26.1 Boyd Gaming Corp.: Profile. Yahoo! Finance.
- ↑ 27.0 27.1 27.2 Corporate Profile. Harrah's Entertainment.
- ↑ Split metrics represent Las Vegas Properties and The Venetian Macao respectively.
- ↑ Split metrics represent Las Vegas and Macau properties respectively.
- ↑ Investor Relations: Overview. Wynn Resorts.
- ↑ 31.0 31.1 31.2 31.3 WYNN February 24, 2009 8-K pg. 10
- ↑ 32.0 32.1 WYNN 8-K pg. 6
- ↑ MGM 2008 10-K pg. 16
- ↑ MGM 2008 10-K pg. 27
- ↑ Metric for Las Vegas properties.
- ↑ 36.0 36.1 MGM 2008 10-K pg. 54
- ↑ BYD 2008 10-K pg. 3
- ↑ Calculated as simple average of all individual properties' metrics
- ↑ 39.0 39.1 Boyd Gaming Corp.: Income Statement. Yahoo! Finance.
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