Las Vegas Sands (LVS) and Sands China (HK: 1928): 3Q13 earnings

the results

After the New York close yesterday, LVS announced 3Q13 results for itself and for its subsidiaries, Macau-based 1928 and wholly owned Marina Sands of Singapore.

Revenues for LVS came in at $3.57 billion, up 31.7% year on year.  EBITDA (earnings before interest, taxes, depreciation and amortization)  advanced by 45.5% yoy to $1.28 billion.  EPS was $.82, a 78.3% yoy increase.  That figure exceeded the Wall Street consensus by $.05.

During the quarter, LVS repurchased 4.6 million shares of its stock, at an average price of $65.18.  It says it will buy back a minimum of $75 million in stock a month from now on.

LVS also raised its quarterly dividend from $.35/share to $.50, giving a forward yield of 2.8%.

 

1928 rose by almost 10% in overnight trading in Hong Kong (in a market where other Macau casino stocks were up by 4%-5% or so).  LVS has barely budged in this morning’s pre-market trading.

 

the highlights

Macau

LVS is a convention hotel operator.  Its strength is catering to customers who have, say, $10,000 to gamble during a stay rather than VIPs with $1 million or more.  Its huge investment in hotel/casino capacity in the Cotai section of Macau on the conviction that if Sands built it, customers would come, is beginning to pay off royally now.

EBITDA for 1928 came in at $785.3 million for the quarter, up 61.7% yoy.

Singapore

Marina Bay’s EBITDA was $373.6 million, up 43.3% yoy.  However, the amount bet by VIP gamblers was only up by 16.9%.  The largest portion of the EBITDA increase comes from the casino “win” (the amount gamblers lose, which is what casinos count as revenue) bouncing back from an abnormally low 1.79% of the amount bet during 3Q12 to a more normal 2.85%.

US

Down a bit, yoy.  EBITDA in Las Vegas was $87.1 million (vs. $98.2 million during 3Q12).  Bethlehem, Pa brought in $29.6 million (vs. $32.1 million).

my take

At this point, over 90% of LVS’s EBITDA comes from Asia.  That percentage will continue to climb.

Marina Bay is an enigma to me.  …a good enigma, but a puzzle nonetheless.  It isn’t that long ago that Marina Bay and Macau were neck-and-neck in generation of cash for LVS.  But while Singapore has been relatively stagnant, LVS’s Macau EBITDA have doubled.  Has Marina Bay already topped out at $1.5 billion in annual EBITDA?  I find it hard to think this is the case, but I can’t see any evidence to the contrary from the financials.

Macau is booming   …and the market is rapidly developing a large resort/convention segment, which is LVS’s management specialty.

valuation

At today’s Hong Kong closing quote, LVS’s interest in Sands China is worth $49 billion.

If we make the (conservative, in my view) assumption that Marina Bay will generate about $1.5 billion in annual cash flow and that we’re willing to pay 10x for that, then the Singapore subsidiary is worth $15 billion.

The same calculation for the US operations (let’s put a cash flow multiple of 8 on it) would value it at about $4 billion.

Total value = $68 billion.  That compares with a total market cap for LVS at yesterday’s close of $58.5 billion.

If these back of the envelope figures are close to correct, LVS is trading at about a 15% discount to the sum of its parts.  Further upside could come from continuing flowering of the Macau operations, which I think is highly likely, and/or a return to growth for Marina Bay.  (I own the stock and am happy to remain a holder.  At some point, I’ll have to trim the position simply because of size, but see no present reason to do any other selling.)

 

 

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