Las Vegas Sands (LVS) is a developer, owner and operator of destination casino resorts. It operates in the U.S., Macau, and Singapore. Competitors include Wynn Resorts, Limited (WYNN), MGM Resorts International (MGM), SJM (HKG:0880), Galaxy (HKG:0027) and Harrah's among others.
The company's Las Vegas properties feature 7,100 suites and approximately 225,000 square feet of gaming space, which includes approximately 240 table games and 3,020 slot machines. In 2009, LVS expanded its presence in the U.S. with the opening of its Sands Bethlehem resort in Pennsylvania.
In April 2010, LVS opened the Marina Bay Sands facility in Singapore, at an approximate cost of $5.5 billion. The integrated resort has 2,600 rooms, 161,000 square feet of gaming space, and 1.3 million square feet of convention and meeting space.
In a recent press release, LVS revealed that it is eyeing a $20.3 billion project in Spain. CEO Sheldon Adelson has indicated the potential to create a mini Las Vegas Strip in Europe.
Coverage Launch; $57.5 Price Estimate for LVS
We recently launched coverage on Las Vegas Sands with a $57.50 price estimate for the company's stock, roughly 25.5% ahead of market price.
We have broken down our analysis of Las Vegas Sands into six main business segments:
1. Macau Hotels & Games
2. Singapore Hotels & Games
3. Las Vegas Hotels & Games
4. Convention, Retail & Other
5. Food & Beverage
6. Pennsylvania Casino & Others
Singapore Casino Industry Poised for Substantial Growth
In 2006, the Singaporean government opened the region to the gaming industry by awarding two casino licenses. The fortunate recipients were Las Vegas Sands and Genting Singapore. The government has presently restricted entry into the market to these two casino resort operators and has decided not to issue another gambling license for at least ten years, creating an effective duopoly.
Genting Singapore's Resorts World Sentosa facility opened its doors in February 2010, becoming the first resort to do so in Singapore. Soon after, in April 2010, LVS followed suit with its Marina Bay Sands facility.
According to estimates by PricewaterCoopers, Singapore's casino gaming market stood at $2.8 billion in 2010.
PwC has predicted that Singapore will overtake South Korea and Australia this year to become the second-largest Asia-Pacific casino market behind reigning leader Macau. In 2011, with the first full year's operations for both resorts on the books, PricewaterCoopers expects Singapore revenues to reach $5.5 billion. The firm further anticipates this number to increase to $8.3 billion by 2014.
In 2010, most of the Singapore resort visitors came from the Asia-Pacific region, with mainland China, Australia, Indonesia and India together accounting for 53%.
LVS Maintains a Strong Presence in Macau
In 2002, the government of Macau liberalized the gaming industry by granting licenses to three gaming operators (Galaxy, Wynn Resorts and SJM). During December 2002, LVS entered into a subconcession agreement with Galaxy, which was approved by the Macau government. The subconcession agreement allows LVS to develop and operate casino projects in Macau.
Currently, there are 33 operating casinos in Macau, of which SJM operates 20. Major players apart from LVS include Melco Crown, SJM, Galaxy, Wynn Resorts and MGM Resorts.
Since casino licenses were made available to foreign competitors in 2002, the Macau gaming industry has witnessed substantial growth. In 2010, casino revenues soared 58% over 2009 to reach $23.5 billion.
LVS has maintained a presence in Macau since 2004. Its Sands Macao facility was the first Las Vegas-style casino to open in Macau. LVS' Macau operations currently include Sands Macao, The Venetian Macao and Four Seasons Macao. LVS is also in the process of developing a facility on the Cotai Strip in Macau (at land plots designated as parcels 5&6).
Macau Remains the Focus of the Gaming Industry
According to Macau government statistics, 81.4% of the tourists who visited Macau in 2009 came from Hong Kong or mainland China. Macau also enjoys the locational advantage due to its proximity to major Asian cities. It is closely inhibited by approximately 3 billion people who live within a five-hour flight from Macau.
Table games are the dominant form of gaming in Asia, and of all table games, baccarat is king. In 2010, Macau's VIP baccarat gaming generated $16.9 billion in revenues, a 70% annual increase. Mass market baccarat also generates substantial revenues in Macau, with 2010 revenues of $4.3 billion, up 37% annually.
An expanding Chinese middle class is expected to spur continued growth in travel to Macau and generate increased demand for gaming, entertainment and resort offerings. A strong Chinese economy and increasing population of high net worth individuals has also bolstered the rise of Macau's gaming industry.
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