Majestic Research

Bloomberg

Las Vegas Sands Net Falls on Higher Development Costs

By Oliver Staley
Published: February 04, 2008

Las Vegas Sands Corp., the world’s largest casino company by market value, said fourth-quarter profit fell 65 percent on higher interest expenses and development costs.

Net income dropped to $39.9 million, or 11 cents a share, from $113.6 million, or 32 cents, a year earlier, the Las Vegas-based company said today in a regulatory filing. Revenue rose 65 percent to $1.05 billion, trailing analysts’ estimates.

Las Vegas Sands opened the Venetian, a 3,000-room hotel and casino, in August in Macau, the only region in China where casinos are legal. The company, run by billionaire Sheldon Adelson, is spending $11 billion on additional hotels and casinos on Macao’s Cotai Strip and as much as $2 billion more on condominiums on nearby Hengqin Island.

“They certainly have a very aggressive plan for Macau, and they have to show that the market can absorb all this new capacity, not just from them but their competitors,” said Matthew Jacob, an analyst with Majestic Research LLC in New York. “That’s what the concern is: At what point does growth get tapped out?”

Excluding development and other costs, Las Vegas Sands earned 20 cents a share. William Lerner, an analyst with Deutsche Bank Securities Inc., estimated profit of 26 cents. He recommends investors buy the shares.

Las Vegas Sands rose $1.54, or 1.9 percent, to $82.99 at 4:54 p.m. in trading after the results were released. Earlier, the shares fell $6.40, or 7.3 percent, to $81.45 in New York Stock Exchange composite trading. The shares climbed 15 percent last year.

Eleven analysts surveyed by Bloomberg projected average revenue of $1.09 billion.

Macau Revenue

Casino revenue in Macau rose 47 percent last year to $10.3 billion. It has surpassed the Las Vegas Strip as the world’s most lucrative gambling market.

Las Vegas Sands was the first western company to break the monopoly held by casino operator Stanley Ho when it opened the Sands Macao in 2004. Wynn Resorts Ltd. and MGM Mirage, also based in Las Vegas, have since followed with their own developments.

On Jan. 18, Sands opened the $1.8 billion Palazzo Las Vegas adjacent to The Venetian, giving it a combined 7,000 rooms on the Las Vegas Strip.

“One of the times of peril for casino investors is the period immediately after the opening of a new facility,” said Frank Husic of Husic Capital Management in San Francisco in an interview on Bloomberg Radio.

“Employees are all new, there’s usually chaos, room service doesn’t get it right, people are in the wrong rooms,” Husic said. “Above all, there’s a very deleterious impact on bottom-line margins.”

The company is also building the $3.8 billion Marina Bay Sands in Singapore, scheduled to open in 2009, and the $800 million Sands Bethworks in Bethlehem, Pennsylvania.