the report
LVS reported 3Q10 earnings after the close yesterday. Adjusted EBITDA was $645.2 million vs. $272.3 million in the year-ago quarter. Revenue was $1.91 billion vs. $1.14 billion. Diluted eps was $.34 vs. $.03 for the September quarter 2009 and a consensus estimate of $.27.
The stock rose about 11% in aftermarket trading. WYNN went up in sympathy by 3.7% and MGM by 2%. There was a significant positive reaction in Hong Kong as well, with 1928 up by about 9%, although 1128 barely budged.
the details
The EBITDA for the quarter breaks down by location as follows (all figures are in US$):
Macau $307 million vs. $237.7 million in the September period of 2009
Singapore $241.6 million vs not open
US $74.4 million vs. $42.8 million.
the conference call
To my mind, the really stunning information came in the conference call. Chairman Sheldon Adelson began by saying he had been wrong at the company’s annual meeting to say EBITDA for LVS could be $3 billion in 2011. According to Mr. Sheldon, business in October is running “substantially in excess” of that figure.
In Singapore, where all the elements of the resort complex are not yet in place, October revenues have been running at $8.4 million per day, at a 50% EBITDA margin. This works out to EBITDA of $130 million for this month alone. True, October is a holiday month. But LVS also said that business momentum has been steadily building, with each month in the September quarter better than the previous one.
In Macau, October will also turn out to be a record month.
Las Vegas is slowly improving. Demand from groups is very strong but massive overcapacity in the city will keep hotel room rates from rising. Bethlehem, PA will benefit from the introduction of table games and from the hotel LVS is building there.
impressions
I don’t know LVS well enough to have an investment opinion, although it does appear the company has decisively turned the corner. The biggest investment issue is that at the June 10-Q, LVS had about $9.5 billion in liabilities on the balance sheet, even after netting out $3.5 billion in cash on hand. LVS thinks that when it gets permission to sell apartments at its Four Seasons complex in Macau, they could go for up to $1.4 billion. Mr. Adelson also believes that LVS will be able to sell its retail space in Singapore for enough to repay all its construction-related debt there. These sales have the potential to transform LVS’s capital structure. On the other hand, LVS now appears to be lobbying aggressively to expand into Japan and Korea.
Singapore has an open-ended feel to it. It’s possible LVS is only scratching the surface of potential demand.
In Macau, Mr. Adelson thinks all the competitors, except for LVS and WYNN, are starting to revert to the traditional way of doing gambling business. That is to say, they are beginning to in effect rent their casino space to junket operators for a small fee. Thereby, they avoid the problems of extension and collection of credit. On the other hand, they lose contact with the high roller customers. Presumably they become less desirable venues and end up being considerably less profitable than WYNN and LVS.
LVS has “mixed feelings” about Las Vegas. Overcapacity won’t go away soon. Even if smaller operators go into bankruptcy, the hotels and casinos will be acquired by entrepreneurs who will reopen them. Bethlehem has the problem of competition from nearby states that are sponsoring casino gambling as a way to address budget woes.
We’ll get more information on Las Vegas and Macau when WYNN reports next Tuesday.