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Robust 1Q for Las Vegas Sands

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Nevada-based Las Vegas Sands Corp. (LVS - Free Report) recently reported adjusted earnings of 70 cents per share in the first quarter of 2012, surpassing the Zacks Consensus Estimate of 60 cents and 89.2% higher than the year-ago quarter earnings of 37 cents per share.

On a GAAP basis, the company reported a net income of $498.9 million or 61 cents per share compared with $228.2 million or 28 cent per share in the year-ago quarter. The improvement primarily reflects a rise in operating income and discontinuation of preferred stock dividend, partially offset by an impairment loss.

Quarterly net revenue climbed 30.8% year over year to $2.76 billion, outperforming the Zacks Consensus Estimate of $2.67 billion. Consolidated adjusted property EBITDA (earnings before interest, taxes, depreciation and amortization) shot up 43.0% year over year to $745.7 million.

The significant upside in quarterly results was attributable to outstanding performance of Macao business and solid performance of Singapore and Las Vegas business.   

Macao Businesses

Las Vegas Sands’ integrated resort properties and other assets in Macao are owned and operated by Sands China Ltd., which is a majority-owned subsidiary of the company. Net revenue at Sands China jumped 25.0% year over year to $1.45 billion during the quarter. Adjusted property EBITDA perked up 20.5% to $450.6 million during the quarter.

Net revenue increased 21.1% year over year to $772.8 million at The Venetian Macao, while Sands Macao earned revenues of $349.1 million, up 8.1%. Moreover, revenues at Four Seasons Hotel Macao and Plaza Casino surged 74.1% to $299.6 million, driven by strong visitation and growth in Macao.

Revenue per Available Room (RevPar) improved across all the three properties; Venetian Macao, Four Seasons Hotel Macao and Plaza Casino and Sands Macao.

Macao, the only Chinese city where gambling is legal, is experiencing higher gaming volume due to gaming-friendly policies of the local government. The performance at Macao is also driven by strong growth at mass table and slot businesses, along with the contribution from non-gaming amenities. On April 11, Las Vegas also opened the first phase of its latest Integrated Resort offering, Sands Cotai Central at the centre of the Cotai Strip.  We believe that this will drive additional visitation in Macao and will further boost Las Vegas market share in Macao.

Las Vegas Businesses

Net revenue from the Las Vegas operations, which consist of The Venetian Las Vegas and The Palazzo, leaped 26.1% year over year to $384.6 million. The upside in revenue was driven by growth in slot handle, table games play, and hotel revenues along with stronger group meeting and convention business. Adjusted property EBITDA shot up 77.6% to $115.8 million. The company’s Las Vegas business is improving as it continues to focus on cash revenues to drive visits and is significantly cutting back on compensation allotment and other promotions. Management also remains encouraged as convention bookings continue to improve.

Marina Bay Sands in Singapore

Marina Bay Sands, which debuted in April 2010, earned revenues of $848.7 million during the first quarter of 2012, up 45.1% year over year. The revenue growth was driven by robust VIP, mass gaming and slot volumes coupled with strong visitation from all over Asia and higher revenue streams from non-gaming facilities. Adjusted property EBITDA rose 66.1% to $472.5 million.

Singaporeis poised to grow as the surrounding areas have a high propensity to gamble and further development in transport infrastructure will drive more tourists.

Balance Sheet

At end of the quarter, the company had $4.06 billion in unrestricted cash balance. Total debt outstanding, including the current portion, was $9.9 billion. The company has scheduled principal payment requirements for 2012 and 2013 of $352.0 million and $543.4 million, respectively.

Our Take

We believe that the company is on track to deliver solid results. We remain bullish regarding the growth prospects at Macao and Marina Bay Sands in Singapore is a significant catalyst for the company. Moreover, performance at Las Vegas also remains solid benefiting from global travel demand. The company reported better-than-expected results, which will likely drive the estimates going forward.

The company holds a Zacks #2 Rank, which translates into a 'Buy' rating over the short term. We also maintain our long-tern "Neutral" recommendation on the stock.

One of Las Vegas Sands' primary competitors MGM Resorts International (MGM - Free Report) will report its first quarter 2012 earnings on May 3, 2012.

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