Majestic Research

Investor's Business Daily

Profit Growth Cools at Las Vegas Sands but Tops Forecasts

By Brian Womack
Published: February 05, 2007

Las Vegas Sands (LVS) got a little lucky.

The casino operator easily beat adjusted fourth-quarter estimates—but high-rollers on the Strip helped pump up results as Asia continued its growth as well.

Las Vegas Sands cleaned up at the Venetian, with operating income jumping 73% to $112 million in the fourth quarter.

“The property is clearly firing on all cylinders,” William Weidner, president and chief operating officer, said during the conference call.

The house winning percentage came in at nearly 37% for the Venetian, compared with 26.4% in the year-ago period.

“It’s a solid quarter for the company,” said Matthew Jacob, an analyst with Majestic Research. “You have to kind of adjust the number for the table luck issue. When you do that, it appears it gets it closer to what the investors were looking for.”

Earnings, Revenue Strong

Overall adjusted earnings per share climbed 12% to 37 cents vs. a year earlier. It was the fourth straight quarter of decelerating profit growth. But Wall Street had expected a 6% decline to 31 cents.

Revenue soared 27% to $636.3 million, blowing out analysts’ forecasts for $563.8 million.

Las Vegas’ shares edged lower in after-hours trading, more than erasing slim gains ahead of the fourth-quarter results.

But the stock has been on a tear, climbing more than 40% in the past three months. It has more than doubled in the past year.

Investors like Las Vegas Sands’ aggressive moves outside of the Strip to drive long-term growth.

The company has a strong foothold in red-hot Macau. China’s island casino enclave surpassed Las Vegas, Nev., in gaming revenue last year, said Robert LaFleur, an analyst with Susquehanna International.

Las Vegas Sands’ fourth-quarter revenue in Macau rose by 27.1% vs. a year earlier to $343.3 million, about as expected. It was up 39% in the third quarter to $339 million.

However, Macau’s operating margins weakened slightly.

The company said it withstood new competition that entered Macau in the early autumn. Las Vegas Sands said it had a 21% market share on the island in December—higher than what it had before the new rival.

Big Macau Expansion Planned

“I think it’s encouraging given the company’s (focus) on Macau in the future,” Jacob said.

Las Vegas Sands entered Macau in 2004 with its first casino. It was the first U.S. gaming firm there, ending Stanley Ho’s monopoly.

The company has much bigger plans. It has started building Macau’s “Cotai Strip,” which will include not just casinos—but meeting and convention space. The $11 billion project will also feature retailers.

Las Vegas Sands has been negotiating with the Chinese government to build a high-end real estate resort on nearby Hengqin Island. That could cost $8 billion.

Company officials said there has been progress on that project, but more approvals remain before the project is finalized.

In December, the company said it won approval to build a site in Bethlehem, Pa. The site’s plans include 5,000 slot machines and 200,000 square feet of retail space, among other attractions.