MGM MGM Resorts International

Casino company - Las Vegas Sands Corp. (LVS) recently reported adjusted earnings of 46 cents per share in the third quarter of 2012, substantially below the Zacks Consensus Estimate of 60 cents and the year-ago quarter earnings of 55 cents per share.

On GAAP basis, the company reported net income of $349.8 million or 42 cents per share compared with $353.6 million or 44 cent per share in the year-ago quarter. The decline in results was primarily due to a drop in operating income partially offset by the benefit from the discontinuation of preferred stock dividend.

Quarterly net revenue climbed up12.5% year over year to $2.71 billion. However, it missed the Zacks Consensus Estimate of $2.88 billion. Consolidated adjusted property EBITDA (earnings before interest, taxes, depreciation and amortization) plunged 5.1% year over year to $924.1 million. The poor results were due to weak business at its Singapore operations.  
 
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 36.7% year over year to $1.64 billion during the quarter. Adjusted property EBITDA perked up 24.3% to $485.6 million during the quarter.

Net revenue increased 12.1% to $772.8 million at The Venetian Macao, while Sands Macao earned revenues of $315.3 million, up 2.6%. Moreover, revenues at Four Seasons Hotel Macao and Plaza Casino surged 32.8% to $224.5 million, driven by strong visitation and growth in Macao. Net revenue at Sands Cotai Central, the first phase of which was opened on April 11, 2012, was $295.9 million.

Revenue per Available Room (RevPAR) fell 2.3% and 1.3%, respectively, at Venetian Macao and Sands Macao, but leaped 22.4% at Four Seasons Hotel Macao and Plaza Casino.

On September 20, Las Vegas also opened the second phase of its Integrated Resort offering, Sands Cotai Central at the centre of the Cotai Strip.  We believe facilities of Sands Cotai 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 comprises The Venetian Las Vegas and The Palazzo, leaped 17.0% year over year to $364.4 million. The upside in revenue was driven by growth in slot handle, table games play and casino revenue. Adjusted property EBITDA nudged up 4.1% to $94.3 million.

Marina Bay Sands in Singapore

Revenue at Marina Bay Sands, which made its debut in April 2010, dropped 21.1% to $625.5 million during the third quarter of 2012. The decline in revenue was due to lower Rolling Chip win volume and slot handle and higher provision for accounts receivable. Adjusted property EBITDA declined 37.0% to $260.8 million. However, the Marina Bay Sands enjoyed RevPAR growth of 12.1% driven by higher occupancy and average daily rate.

Liquidity

At end of the quarter, the company had $3.75 billion in unrestricted cash balance. Total debt outstanding, including the current portion, was $9.50 billion. The company has scheduled principal payment requirements for 2012 and 2013 of $8.7 million and $97.5 million, respectively.

Dividend Raised

During the quarter, the company also raised its quarterly dividend by 40% to 35 cents per share. The increased dividend will be paid from the beginning of the first quarter of 2013.

Our Take

The company reported lower-than-expected results due to weak business in Singapore and our outlook for the Macao market remains feeble as a result of slowing economic growth in China. However, a dividend hike of 40% was encouraging which reflects that Las Vegas is heading toward strong future growth.

The company holds a Zacks #3 Rank, which translates into a 'Neutral' rating over the short term. We also maintain our long-tern "Underperform" recommendation on the stock.

One of Las Vegas Sands' primary competitors MGM Resorts International (MGM) recently reported third-quarter 2012 adjusted loss of 23 cents per share down from the Zacks Consensus Estimate of a loss of 16 cents per share.
 

 
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