Las Vegas, Nevada-based casino and hotel operator, Las Vegas Sands Corp.’s (LVS - Analyst Report) third-quarter 2013 adjusted earnings of 78 cents per share, beat the Zacks Consensus Estimate of 75 cents by 4.0% and the comparable year-ago quarter’s earnings of 53 cents per share by 47.2%. The company’s higher top line and margin expansion drove the earnings during the quarter.
Quarterly net revenue increased 31.7% year over year to $3.57 billion and also surpassed the Zacks Consensus Estimate of $3.46 billion by 3.2%. The company’s solid Macau business and growing Singapore as well as Las Vegas businesses backed the year-over-year rise in revenues.
The operating margin expanded 590 basis points (bps) to 25.6% in the third quarter, driven by solid operating performance at Macao properties.
Consolidated adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) were $1.28 billion, up 45.5% year over year, led by higher Macao gaming volumes.
Property Level in Detail
Las Vegas Operations (The Venetian Casino and The Palazzo)
Net revenue from the Las Vegas operations, which comprises The Venetian Las Vegas and The Palazzo, increased 2.9% year over year to $375 million, mainly driven by 22.2% increase in food and beverage revenues.
During the quarter, revenue per available room (RevPAR) increased 2.4% year over year to $171 million with 2.6% and 0.3% rise in average daily rate (ADR) and occupancy, respectively. Adjusted property EBITDA was down 11.3% year over year $87.1 million in the third quarter.
Sands Bethlehem, Pennsylvania
Sands Bethlehem in Bethlehem, Pennsylvania opened the first phase of its facilities for business on May 22, 2009. Net revenue at Sands Bethlehem was $122.9 million in the first quarter, up 0.7% year over year, driven by higher rooms and mall revenues. Room revenues increased 18.5%, primarily attributable to 16.2% rise in RevPAR due to higher occupancy rate. Adjusted property EBITDA was down 7.8% year over year to $29.6 million in the third quarter.
Las Vegas Sands’ integrated resort properties and other assets in Macao are owned and operated by one of its majority-owned subsidiary – Sands China Ltd. The company continues to witness significantly higher visitation at its Macao properties in the third quarter.
The company’s Macao business includes the following resorts:
The Venetian Macao
Net revenue increased 21% year over year to $935.2 million at The Venetian Macao with a 22.9% and 23.3% increase in casino revenues and mall revenues, respectively. Rolling Chip volume was up 26.4% year over year to $14.2 billion. The property witnessed solid traffic during the quarter. The Venetian Macao played a major role in augmenting the company’s revenues.
RevPAR increased 4.2% in the quarter with a 6.6% rise in ADR. Adjusted property EBITDA was up 19.5% year over year to $357.2 million in the third quarter.
Sands Cotai Central
On Sep 20, 2012, the company successfully unveiled the second phase of its Integrated Resort offering – Sands Cotai Central – at the centre of the Cotai Strip. Sands Cotai Central welcomed 4.5 million guests in the third quarter.
Net revenue at Sands Cotai Central stood at $736.6 million which was significantly higher than the year-ago quarter’s revenues of $295.9 million. The quarterly revenues were driven by higher casino and no-casino revenues and strong traffic. In the quarter, Rolling Chip volume increased 71.7% year over year to $15.6 billion.
Adjusted property EBITDA was $224.3 million versus $53.7 million in the year-ago quarter. EBITDA increased with the rise in gaming volume.
We believe that the facilities provided by Sands Cotai, especially its high gaming potential, will further drive the company’s market share in Macao.
Four Seasons Macao
Revenues at Four Seasons Hotel Macao and Plaza Casino increased 47% to $330.0 million with higher casino as well as non-gaming revenues. RevPAR was up 10.7% with the rise in ADR and occupancy rate.
Sands Macao’s revenues were down 3.2% year over year to $305.3 million due to a decline in casino revenues. Adjusted property EBITDA was up 11.1% year over year to $89.9 million in the third quarter.
Marina Bay Sands, Singapore
Revenues at Marina Bay Sands, which made its debut in Apr 2010, rose 23.8% year over year to $774.2 million during the third quarter with double-digit growth at both casino and rooms revenues. Sands also recorded an 11.1% RevPAR growth, driven by 11.1% rise in ADR.
Adjusted property EBITDA has increased 43.3% year over year to $373.6 million, led by higher Rolling Chip volume.
On Jun 5, 2013, the company approved a new $2.0 billion share repurchase plan. At the end of the third quarter, Las Vegas bought back 4.6 million shares worth $46.5 million.
During the quarter, the company also raised its quarterly dividend by 42.9% to 50 cents per share for 2014 thus bringing annualized dividend of $2.00 per share. The increased dividend will be paid from the beginning of the first quarter of 2014.
The Zacks Rank #2 (Buy) company reported better-than-expected results led by solid Macao and Las Vegas businesses. The nearly 43% dividend hike is encouraging which reflects that Las Vegas is heading toward strong growth.
Some other companies from the gaming industry that are worth considering at the current level include Churchill Downs Inc. (CHDN - Snapshot Report), Melco Crown Entertainment Limited (MPEL - Snapshot Report) and Full House Resorts Inc. (FLL - Snapshot Report). While Churchill Downs and Melco Crown carry a Zacks Rank #1 (Strong Buy), Full House Resorts carries a Zacks Rank #2 (Buy).