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Las Vegas Sands Strategic Efforts Bode Well: Should You Hold?
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Las Vegas Sands Corp. (LVS - Free Report) is riding high on robust top- and bottom-line growth, EBITDA margins improvement, gain in Non-rolling drop and non-rolling win and expansion in Las Vegas. As a result, shares of the company have rallied 8.3% in a year’s time compared with the industry’s 1.7% growth. However, high debt remains a major concern. Let’s delve deeper.
Hidden Catalysts
Las Vegas Sands, one of the leading companies in the gaming and lodging industry, has a solid business model, extensive non-gaming revenue opportunities, high quality assets and attractive property locations. The company’s strong portfolio has somewhat helped it to withstand the economic downturn in China, which affected its operations in Macao.
Moreover, the company, which generates a major part of its revenues from Macao, has been reporting impressive results from the region. In second-quarter 2018, Las Vegas Sands reported solid growth in the Macao business. Additionally, revenues and EBITDA increased 18% and 25%, respectively. In Macao, the company witnessed robust mass market growth in the second quarter, following a gain in first-quarter 2018 and fourth-quarter 2017. Non-rolling drop and non-rolling win witnessed an improvement of 19% and 20%, respectively, in the reported quarter.
Las Vegas Sands also is concentrating on renovation and promotion of its Las Vegas properties in order to drive segmental performance. In fact, the Las Vegas Strip has been recording high occupancy rates over the past year. The improvement in employment rate and rise in tourism numbers in the region has been increasing demand at the company’s properties in Las Vegas. In second-quarter 2018, net revenues from Las Vegas operations, which comprise The Venetian Las Vegas and The Palazzo — including the Sands Expo and Convention Center — increased 2.6% to $402 million. The upside can be attributed to a 10.4%, 15.2% and 5.2% rise in rooms, food and beverage, and convention, retail and other revenues, respectively.
Meanwhile, EBITDA margins have been improving consistently owing to focus on mass and non-gaming segments, which carry higher margins. Las Vegas Sands expects that it would continue delivering growth in the non-gaming segment. The company has delivered margins of more than 30% since the beginning of 2012. In second-quarter 2018, it reported hold-normalized EBITDA margin of 35.2%, up 170 basis points year over year.
Concerns
This Zacks Rank #3 (Hold) company’s heavy reliance on debt financing remains a concern. As of Jun 30, 2018, unrestricted cash balance was $4.35 billion. However, total debt outstanding, including the current portion and net of deferred financing costs and original issue discount, was as high as $11.32 billion. Owing to a higher debt burden, the company might fail to finance its upcoming projects. Moreover, any downturn in the macroeconomic and credit market conditions would make it difficult for Las Vegas Sands to pay or refinance its debt, moving ahead.
Further, increased hotel openings and promotional activities have made Las Vegas and Macao markets highly competitive. Thus, excess supply, especially in the Macao market, might reduce the company’s market share.
Also, the company’s recently opened The Parisian Macao along with other upcoming resorts at the Cotai Strip faces extreme peer pressure from several Chinese casino operators and other U.S. based companies. In Aug 2016, Wynn Resorts, Limited (WYNN - Free Report) opened a full-scale integrated resort, Wynn Palace, on the Cotai Strip. Another U.S.-based casino giant, MGM Resorts International (MGM - Free Report) , opened resort in Cotai in 2018.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Las Vegas Sands Strategic Efforts Bode Well: Should You Hold?
Las Vegas Sands Corp. (LVS - Free Report) is riding high on robust top- and bottom-line growth, EBITDA margins improvement, gain in Non-rolling drop and non-rolling win and expansion in Las Vegas. As a result, shares of the company have rallied 8.3% in a year’s time compared with the industry’s 1.7% growth. However, high debt remains a major concern. Let’s delve deeper.
Hidden Catalysts
Las Vegas Sands, one of the leading companies in the gaming and lodging industry, has a solid business model, extensive non-gaming revenue opportunities, high quality assets and attractive property locations. The company’s strong portfolio has somewhat helped it to withstand the economic downturn in China, which affected its operations in Macao.
Moreover, the company, which generates a major part of its revenues from Macao, has been reporting impressive results from the region. In second-quarter 2018, Las Vegas Sands reported solid growth in the Macao business. Additionally, revenues and EBITDA increased 18% and 25%, respectively. In Macao, the company witnessed robust mass market growth in the second quarter, following a gain in first-quarter 2018 and fourth-quarter 2017. Non-rolling drop and non-rolling win witnessed an improvement of 19% and 20%, respectively, in the reported quarter.
Las Vegas Sands also is concentrating on renovation and promotion of its Las Vegas properties in order to drive segmental performance. In fact, the Las Vegas Strip has been recording high occupancy rates over the past year. The improvement in employment rate and rise in tourism numbers in the region has been increasing demand at the company’s properties in Las Vegas. In second-quarter 2018, net revenues from Las Vegas operations, which comprise The Venetian Las Vegas and The Palazzo — including the Sands Expo and Convention Center — increased 2.6% to $402 million. The upside can be attributed to a 10.4%, 15.2% and 5.2% rise in rooms, food and beverage, and convention, retail and other revenues, respectively.
Meanwhile, EBITDA margins have been improving consistently owing to focus on mass and non-gaming segments, which carry higher margins. Las Vegas Sands expects that it would continue delivering growth in the non-gaming segment. The company has delivered margins of more than 30% since the beginning of 2012. In second-quarter 2018, it reported hold-normalized EBITDA margin of 35.2%, up 170 basis points year over year.
Concerns
This Zacks Rank #3 (Hold) company’s heavy reliance on debt financing remains a concern. As of Jun 30, 2018, unrestricted cash balance was $4.35 billion. However, total debt outstanding, including the current portion and net of deferred financing costs and original issue discount, was as high as $11.32 billion. Owing to a higher debt burden, the company might fail to finance its upcoming projects. Moreover, any downturn in the macroeconomic and credit market conditions would make it difficult for Las Vegas Sands to pay or refinance its debt, moving ahead.
Further, increased hotel openings and promotional activities have made Las Vegas and Macao markets highly competitive. Thus, excess supply, especially in the Macao market, might reduce the company’s market share.
Also, the company’s recently opened The Parisian Macao along with other upcoming resorts at the Cotai Strip faces extreme peer pressure from several Chinese casino operators and other U.S. based companies. In Aug 2016, Wynn Resorts, Limited (WYNN - Free Report) opened a full-scale integrated resort, Wynn Palace, on the Cotai Strip. Another U.S.-based casino giant, MGM Resorts International (MGM - Free Report) , opened resort in Cotai in 2018.
Key Pick
A better-ranked stocks worth considering in the same space is Penn National Gaming, Inc. (PENN - Free Report) , which carries a Zacks Rank #2 (Buy). The company has reported better-than-expected earnings in the trailing two quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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