By Yaser Anwar, CSC of Equity Investment Ideas
- Las Vegas Sands reported Q4 06 EPS results of $0.37 vs estimates of $0.30/2 on Feb 8th, 07. Total EBITDA came in $223 million (31%) vs. $170.3 million in Q4 05 , ahead of Street estimates of $209 million.
- Net revenues in Vegas improved 27% YoY, EBITDA improved 57% to $132 million and cash flow grew a healthy 21% YoY (LVS generates strong FcF – development CAPEX).
- Gaming revenues on the LV Strip suggest continued strong health. LVS is also benefiting from the limited supply pipeline over the next few years (The Street expects room growth to be 2.1% in 07 and about 1% in 08) will lead to LVS’s operating environment going forward.
- LVS finished 06 with: a) EBITDA of $736.4 million, b) Debt is $4.14 billion and c) Cash is $1.42 billion.
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- LVS owns and operates about $1.5 billion in Venetian, Vegas & about $382 million in Macau. LVS is developing the $1.3 billion Palazzo casino resort on the Las Vegas Strip and is is also developing the $2 billion Venetian Macau, both scheduled to open in Q3 of 07. Also, LVS will develop a casino project in Singapore with an opening in 09. In 07, investors can expect LVS to generate about $450 million of FCF – development CAPEX.
- LVS’s results benefited from strong growth at the Venetian Las Vegas. Table games grew by 36.9%. On the call, management eluded that this led to an additional $30 million EBITDA in the Q. Total EBITDA at the Venetian increased 56.6% to $131.7 million in 4Q 06 vs $84.1 million same Q last year.
- The Macau market continues to see an increase in gaming supply. LVS’s EBITDA in Macau was up 7+% to $110 million vs. $102.6 million in Q4 05, driven by a 43% increase in "Rolling Chip” for the VIP table drop. “Non-Rolling Chip” (mostly retail and low end customers) drop was down slightly to $1.03 bn vs. $1.04 bn in 05. Slot handle in Macao increased 22.1% to $273.2 million in Q4 06.
- Management talked about updating its progress for approvals on Hengqin Island, where LVS plans to make an initial investment of $400 million over the first 18 months.
- LVS received an official letter from the Zhuhai Municipal People’s Government stating that a project coordination committee had been setup to work with LVS on the master plan. The development will be the largest combined destination resort in Asia with gaming, live entertainment, shopping and a conference center.
- LVS’s long term profit picture is connected to the development of new casino projects and real estate in China and Singapore. Investors should consider risks such as; higher than expected development costs in the aforementioned markets, questions pertaining to demand in those markets and the possibility of regulatory problems.
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