Las Vegas Sands Corp. (LVS) posted adjusted earnings of 55 cents per share in the third quarter of 2011, beating the Zacks Consensus Estimate of 53 cents as well as the year-ago quarter earnings of 34 cents.
On a GAAP basis, the company reported a net income of $353.6 million or 44 cents per share compared with $168.0 million or 21 cent per share in the year-ago quarter. The improvement primarily reflects a rise in operating income, partially offset by higher net income attributable to non-controlling interests (primarily Sands China Ltd.) and preferred stock inducement and repurchase premiums.
Quarterly revenues climbed 26.2% year over year to $2.41 billion, outperforming the Zacks Consensus Estimate of $2.35 billion. Consolidated adjusted property EBITDA (earnings before interest, taxes, depreciation and amortization) shot up 43.2% year over year to $924.1 million.
The significant upside in quarterly results was attributable to strong Macau business, outstanding performance of its new resort in Singapore and improved Las Vegas business.
Macau Businesses
Las Vegas Sands’ integrated resort properties and other assets in Macau are owned and operated by Sands China Ltd., which is a majority-owned subsidiary of the company. Sands China reported an 11.1% year-over-year growth in revenues to $1.20 billion during the quarter.
Revenues increased 11.0% year over year to $689.2 million at The Venetian Macau, while Sands Macau earned revenues of $307.4 million, up 6.7%. Moreover, revenues at the Four Seasons Hotel Macau and Plaza Casino jumped 5.4% to $169.1 million.
Average daily rate improved in all the three properties; Venetian Macau, Four Seasons Hotel Macau and Plaza Casino and Sands Macau.
Macau, the only Chinese city where gambling is legal, has survived the economic downturn relatively well. Gaming-friendly policies of the local government have enabled the industry to achieve record earnings. Las Vegas is also set to open its latest Integrated Resort offering, Sands Cotai Central in March 2012, which will further expand its operations in Macau.
Las Vegas Businesses
Revenues from the Las Vegas operations, which consist of The Venetian Las Vegas and The Palazzo, surged 18.2% year over year to $332.5 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 last year earned revenues of $792.4 million during the third quarter of 2011, up 63.1% year over year. The property has been well received and provides ample opportunity for the company to explore the Asian market. Moreover, the property attracts more tourists given the additional high quality non-gaming amenities.
Balance Sheet
At quarter end, the company had $3.95 billion in unrestricted cash balance. Total debt outstanding, including the current portion, was $9.74 billion. The company has scheduled principal payment requirements of $133.0 million for the fourth quarter of 2011.
Our Take
We believe the company is on track to deliver solid results. We remain bullish regarding the growth prospects at Macau and believe that Marina Bay Sands in Singapore is a significant catalyst for the company. We expect the company’s Asian operations to significantly support its earnings growth in the coming quarters.
The company reported better-than-expected results, which will likely drive the estimates going forward. Las Vegas also remains optimistic regarding the introduction of its integrated resort offering, Sands Cotai Central on the Cotai Strip in March 2012, which will further drive visits in Macau.
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’ primary competitors MGM Resorts International (MGM) will report its third quarter earnings on November 3, 2011.
