Where does a business handcuffed by a covenant that caps debt at 7.5 times cash flow go when it needs more money? If it's Las Vegas Sands (NYSE: LVS), it reaches into the bulging pockets of major shareholder and chairman Sheldon Adelson. According to The Wall Street Journal, Adelson has loaned Las Vegas Sands almost half a billion dollars.
The move will allow the company to remain within the covenant of its current $5 billion facility, which is crucial as it looks to raise an additional $2 billion for ongoing projects and refinance a current $3.3 billion loan. Earlier this month, S&P lowered the company's credit rating to B+ from BB-, reflecting weakness in the gaming industry and illiquidity in the company's position.
Traditionally, the large casino-based companies have looked to investment banks for project financing (ouch!) and LVS continues to press forward on plans to build not just in Macau, but other Far East markets such as Singapore and perhaps Taiwan. Even before the current tight money climate in the U.S., though, LVS and other major players in the Far East casino development business have been looking overseas for financing.
With a slowdown in the U.S. economy, the Las Vegas economic expansion has come to a halt. With people unable to pay for a gallon of gas, it comes as no surprise that they are not in the mood to go gamble. The Independent of the UK had a fascinating article about how Las Vegas is suffering with the slow economy.
According to the report: "With Americans cutting back on luxuries, and the price of transport rocketing, the so-called 'Vegas vacation' is facing the axe. This week, as the nation celebrated Independence Day, major hotels were taking stock of a fall in all-important room occupancy rates from their usually impressive 95 per cent levels to nearer 80 per cent."
Gambling revenues have also slipped 3%. Attendance at conventions, a big contributor to the city's coffers has dropped by more than 7%.
All an investor has to do to see how bad the carnage has been is to check some stocks related to the Las Vegas gambling and tourist industry. Las Vegas Sands (NYSE: LVS) has gone in the last 52 weeks from more than $148/share down to around $39, a drop of more than 70%. Ouch. MGM Mirage (NYSE: MGM) has dropped from more than $100/share to under $30.
As the economy continues to sputter, look for more trouble ahead for Las Vegas. On the other hand, contrarian investors may look at an uptick in the U.S. economy, whenever it happens, as a signal to potentially look at stocks that are associated with Las Vegas.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/6/08.
While many know that Bill Gates and Warren Buffet are the two wealthiest, Tony Sagami notes that few know the third: Sheldon Adelson. In his Asia Stock Alert, he explains, "Adelson is the founder and CEO of Las Vegas Sands (NYSE: LVS), our latest featured stock." Here, he looks at the gaming company and its bright prospects in Macau.
"Due to its strategic location in the South China Sea, Macau has a rich history as an Asian trading hub. To this day, it looks more European than Asian. And its popularity with tourists is absolutely exploding - an estimated 27 million visited Macau last year.
"The majority (55%) came from mainland China, but many more visited from Hong Kong (30%) and Taiwan (9%). These tourists are flocking to Macau not because of its history or picturesque seaside location. They're coming to gamble.
"And boy, did they gamble! On my last visit to Macau, I saw table after table filled with boisterous high rollers routinely making $100,000 bets. These 'whales' account for about 80% of Macau's gambling revenues.
"Today, Macau has become the Las Vegas of China. It is the only city in the region with fully legalized gambling. And gambling is deeply engrained in the Asian culture. Plus, Macau is within a five-hour flight of three billion people - nearly half the world's population.
Las Vegas Sands Corp. (NYSE: LVS) stock is falling with the rest of the market this morning as investors, following the JP Morgan Chase (NYSE: JPM) buyout of Bear Stearns (NYSE: BSC) on the cheap, are fearing that other banks have sizable exposure to troubled credit markets, which poses a high amount of risk to an already lagging economy. A struggling US economy would cut into LVS revenues in their domestic properties. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on LVS.
After hitting a one-year high of $148.76 in October, the stock hit a one-year low of $70.70 in January. This morning, LVS opened at $72.00. So far today the stock has hit a low of $70.00 and a high of $73.50. As of 1:55, LVS is trading at $71.12, down $3.70 (-4.9%). The chart for LVS looks bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $100 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in three months as long as LVS is below $100 at June expiration. LVS would have to rise by more than 40% before we would start to lose money. Learn more about this type of trade here.
LVS hasn't been above $100 since the New Year and has shown resistance around $80 recently. This trade could be risky if the US economy turns itself around, but even if that happens, this position could be protected by resistance LVS might find at its 200 day moving average, which is currently around $100. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in LVS.
Las Vegas Sands Corp. (NYSE: LVS) shares are trading higher today, even though the company reported an adjusted fourth-quarter profit of $71.1 million, or 20 cents per share, well below analyst estimates of 35 cents per share. The company blamed high construction costs on multiple new resorts for the lower earnings. However, its Las Vegas Strip model of casino-resorts is paying off in Macau, as revenues at its Macau resort increased 46% over the previous year to $10.3 billion in 2007.
Due to the fact that LVS sank 7% yesterday on a profit warning from an industry analyst, investors see this morning's earnings as not so bad. Plus, they see something to be excited about in the Macau resort's performance, judging by this morning's jump in stock price. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on LVS.
After hitting a one-year high of $148.76 in October, the stock hit a one-year low of $70.70 last month. LVS opened this morning at $84.74. So far today the stock has hit a low of $84.74 and a high of $90.19. As of 11:05, LVS is trading at $88.61, up $7.16 (8.8%). The chart for LVS looks bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
Las Vegas Sands (NYSE: LVS) opened the company's new $1.9 billion resort.
The Palazzo Las Vegas is the first hotel to open on the Las Vegas Strip in nearly three years.
LVS closed at $74.46. LVS February option implied volatility of 67 is above its 26-week average of 49 according to Track Data, suggesting larger price fluctuations.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Las Vegas Sands Corp. (NYSE: LVS) shares opened higher this morning on a New York Times story noting how gambling revenues for Las Vegas casinos are high this year, and "way up" in the past few weeks. The story cites casinos catering to affluent customers and foreign customers from countries with strong currencies as major reasons for the gambling boom this year. LVS stock is in the red now, but that move could be attributed to investors who bought the stock at its highs selling their positions to get the tax-loss this year. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on LVS.
After hitting a one-year low of $71.24 in June, the stock hit a one-year high of $148.76 in October. LVS opened this morning at $107.85. So far today the stock has hit a low of $107.02 and a high of $110.45. As of 11:25, LVS is trading at $107.05, down $0.87 (-0.8%). The chart for LVS looks bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
This post was part of the AOL Money & Finance Best & Worst of 2007 feature. The voting has now closed and readers have chosen the Dubaias the breakout city of the year. Be sure to let us know in the comments if you are pleased with this result.
What are breakout cities? Cities that seemed to pop up in news stories with uncommon frequency, that have developed a cachet, that appear on the itinerary of early adopters. For your consideration here are four outstanding, very different candidates for this honor. Which whets your travel appetite?
Dubai City, U.A.E. Nothing helps build a city quicker than petrodollars and a monarchy devoted to world-class projects. Dubai has all of that and more. The city that calls itself the "City Built For Tourism" is known as the home of the world's largest free-standing hotel, the Burj Al Arab. This ultra-ultra-luxury, 1,000-ft. tall hotel with a profile evoking billowing sails has quickly become the symbol of Dubai.
Under the vision of the ruler Mohammed bin Rashid Al Maktoum, Dubai has used its free-trade zone status to also develop into a world center for business. Having the world's largest manmade harbor and an airline that serves as a hub for the Persian Gulf region (with a new one under construction) helps, too. Dubai's acceptance of other culture's mores has helped turn it into a popular tourism destination, as well.
MOST NOTEWORTHY: British American Tobacco, Covad Communications, Pacific Capital, Volcom and American Medical Systems were today's noteworthy downgrades:
Covad Communications (NYSE: DVW) was lowered to Hold from Buy at Jefferies. The firm downgraded shares after Platinum Equity Holdings agreed to acquire the company.
Keefe Bruyette downgraded Pacific Capital Bancorp (NASDAQ: PCBC) to Market Perform from Outperform following its Q3 credit loss pre-announcement.
ThinkEquity reduced Volcom (NASDAQ: VLCM) to Accumulate from Buy following its reduced guidance.
American Medical Systems (NASDAQ: AMMD) was downgraded to Market Perform from Outperform at Raymond James and at Piper Jaffray. Piper downgraded shares following the lower-than-expected Q3 results. Shares were also downgraded to Hold from Buy at Stifel following the weak Q3 report.
OTHER DOWNGRADES:
Citigroup downgraded Mechel OAO (NYSE: MTL) to Hold from Buy.
Las Vegas Sands (NYSE: LVS), a leading international developer of multi-use integrated resorts operated by Sheldon Adelson, is recently down $10.62 to $133.97.
Morgan Stanley said that preliminary Macau gaming revenues are up 55% YoY versus its estimate for 70% and below the Street's estimates.
LVS October option implied volatility of 57 is above its 26-week average of 41 according to Track Data, suggesting larger price fluctuations.
Las Vegas Sands (NYSE: LVS), a leading international developer of multi-use integrated resorts operated by Sheldon Adelson, is recently up $4.42 to $142.73. LVS October option implied volatility of 56 is above its 26-week average of 41 according to Track Data, suggesting larger price fluctuations.
Belden (NYSE: BDC) designs, manufactures and markets signal transmission solutions for data networking and specialty electronic markets. BDC is recently up $3.74 to $52.03 on overseas takeover chatter. BDC has a market cap of $2.1 billion with June quarterly total revenue of $549 million. BDC call option volume of 1,240 contracts compares to put volume of 193 contracts. BDC October option implied volatility of 47 is above its 26-week average of 37 according to Track Data, suggesting larger risk.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
The Resorts World is a cooperative venture of Genting Int'l (75% stake) and Star Cruises (25%). The 120-acre, $5.2 billion development will include casinos, a Universal Studios theme park, hotels, a marine park, and other resort entertainments. Las Vegas Sands is constructing the Marine Bay Sands, investing over $3 billion in the facility. Early projections point to a 2009-2010 time frame for its opening.
Universal has promised to not build any other parks in SE Asia for 30 years as part of its agreement to build a $1 billion theme park.
All these grand plans, however, rest on successful completion of the infrastructure by Genting RWS owners, and they are just now reaching the point where final total costs can be estimated. If the partners have developer has to reach deeper for additional cash, investors in LVS and GE may become a bit nervous about the amount of money these companies have already thrown in the pot.
Last year, more money was gambled in Macao, China's version of Las Vegas, than anywhere else in the world. The big players in the casino world are rapidly expanding to serve what they see as a burgeoning market. This week Las Vegas Sands (NYSE:LVS) rolled out the biggest table stake yet, opening the mammoth Venetian Macao.
Las Vegas Sands (NYSE: LVS) volatility Elevated into Macao Resort Hotel opening. LVS opened the Venetian Macao Resort Hotel today. Sheldon Adelson, chairman & chief executive officer, said "it is no overstatement to say that the opening of Venetian Macao represents a massive paradigm shift for Macao and the future of tourism development in Asia." Goldman Sachs (NYSE: GS) says "the scale is enormous and the detail impressive." LVS over all option implied volatility of 44 is above its 26-week average of 39 according to Track Data, suggesting larger price fluctuations.
Ameristar Casinos (NASDAQ: ASCA) implied volatility Elevated at 43. ASCA, a Las Vegas based gaming and Entertainment Company, is recently down $0.55 to $28.39. ASCA has a market cap of $1.6 billion with long term debt of $878 million. ACSA over all option implied volatility of 43 is above its 26-week average of 37 according to Track Data, suggesting larger price risks.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Where does a business handcuffed by a covenant that caps debt at 7.5 times cash flow go when it needs more money? If it's Las Vegas Sands (NYSE: LVS), it reaches into the bulging pockets of major shareholder and chairman Sheldon Adelson. According to The Wall Street Journal, Adelson has loaned Las Vegas Sands almost half a billion dollars.
With a slowdown in the U.S. economy, the Las Vegas economic expansion has come to a halt. With people unable to pay for a gallon of gas, it comes as no surprise that they are not in the mood to go gamble. The Independent of the UK had a fascinating article about how 
Las Vegas Sands
What are breakout cities? Cities that seemed to pop up in news stories with uncommon frequency, that have developed a cachet, that appear on the itinerary of early adopters. For your consideration here are four outstanding, very different candidates for this honor. Which whets your travel appetite?.gif){kind=logo}
Las Vegas Sands
Macao has emerged as the gaming and entertainment hotspot of China, and already 
Last year, more money was gambled in Macao, China's version of Las Vegas, than anywhere else in the world. The big players in the casino world are rapidly expanding to serve what they see as a burgeoning market. This week 
Cramer on BloggingStocks: A troika of opportunity and trouble 
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