Las Vegas Sands (NYSE: LVS), the world’s second biggest casino-resort company, no longer has any business in Las Vegas, except its headquarters. But that may be a good thing.
It now has six properties in Macau and one in Singapore, where it’s building another. Macau is a special administrative region of China, consisting of a peninsula and islands off the country’s southeast coast.
Both Macau and Singapore are arguably stronger gambling markets than Vegas. Macau generates more than twice the gaming revenue of the Las Vegas Strip. Singapore has only two resorts (before Sands’ work in progress). But casinos’ profit margins there frequently exceed those in other places.
Sands history began with the opening of the Sands Hotel and Casino in 1952, which represented the seventh resort on Las Vegas’ Strip. It became the headquarters of the famed “Rat Pack” (led by Frank Sinatra, Dean Martin and Sammy Davis Jr.)
Entertainment-business icons Howard Hughes and Kirk Kerkorian owned the hotel in separate periods, and Kerkorian sold it to Sheldon Adelson in 1988. He built up the company, including its properties in Asia. Then in 2021-22 the company dumped its three Vegas casinos for $6.25 billion.
All about Macau, Singapore
So now Sands is really an Asian company and is taking advantages of the opportunities there. “It has a dominant presence in the supply-controlled Macau market,” wrote Morningstar analyst Dan Wasiolek. It has a 37% share of Macau gaming operators’ hotel-room supply and about 70% of the region’s convention center capacity.
“It also has the most attractive locations on the Cotai Strip, the best location in Macau,” he said. As of Sept. 30, Las Vegas Sands accounted for 28.8% of EBITDA among the six gaming concession operators in Macau. EBITDA stands for earnings before interest, taxes, depreciation and amortization.
The Macau market will stay at six operators until at least 2032. “As a result, we see a continued controlled, limited supply of competition for the Macau market over the next decade,” Wasiolek said.
China’s massive population presents an opportunity for Sands, he said. Of the 1.4 billion people who live in China, only 7.4 million people from the mainland visited Macau in the fourth quarter. “With a large number of people so close to Macau, it is reasonable to expect continued visitation and revenue growth for the region,” he said.
In Singapore, where Sands hopes to complete its new $8 billion casino by 2030, it will maintain its government-mandated duopoly (with Malaysia’s Genting Group) at least until that year. Just like in Macau, the government is unlikely to award a meaningful number of new gaming licenses, given its regulatory approach to minimize gambling by its citizens, Wasiolek said.
Negative earnings number
To be sure, investors showed displeasure with Sands’ fourth-quarter earnings. Net revenue surged 26% in the quarter from a year earlier. But EBITDA registered only $608 million in the quarter for Sands’ Macau properties, below the $628 million analysts forecast. “We are disappointed with that number,” CEO Robert Goldstein said in Sands’ earnings call.
China has cracked down on high-rolling bettors and their agents, who once accounted for half of Macau’s gambling revenues (agents play a role in drawing VIP gamblers). That has forced Sands and its competitors to shift toward mass-market customers.
But the 14% drop suffered by Sands shares a day after the Jan. 28 earnings report was overdone, Wasiolek said. (It has slid 18% year to date.) He expects its Macau profit margins to rise from 2025’s 30.9% level, as the region diversifies into more non-gaming offerings geared toward higher-margin mass travelers.
And, “over time, we see higher-margin mass-player spending improving, aided by the government’s desire to position the region as a global destination,” he said.
So Las Vegas Sands may be a good bet going forward.
Comments