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Gaming Guru

Howard Stutz

Las Vegas Sands surges ahead in quarter

6 February 2007

LAS VEGAS, Nevada -- Las Vegas Sands Corp. executives and Wall Street continue to view the company as a future earnings giant.

Las Vegas Sands Corp. executives and Wall Street continue to view the company as a future earnings giant.

With approximately $17 billion in planned casino and nongaming developments in various phases of design and development in Las Vegas, Macau, Singapore and Pennsylvania, Las Vegas Sands will keep construction crews busy through 2010.

But it doesn't mean the company isn't paying attention to results at its two casinos in Las Vegas and Macau.

Las Vegas Sands said Monday it was reporting net revenues of $2.24 billion in 2006, an increase of 28.5 percent compared with $1.74 billion in 2005.

During the fourth quarter ended Dec. 31, Las Vegas Sands executives said its two operating casinos, The Venetian and the recently expanded Sands Macau, had strong customer traffic that fueled results.

The company said it earned $113.6 million, or 32 cents a share, during the quarter, up from $110 million, or 31 cents per share, a year earlier. Analysts polled by Thomson First Call expected the company to earn 31 cents a share in the quarter.

Quarterly net revenue rose 27.1 percent to $636.3 million from $500.7 million.

At The Venetian, casino revenues were $154 million in the quarter, an increase of 46.5 percent from $105.1 million a year earlier. Las Vegas Sands said The Venetian's hotel revenues jumped 9.8 percent, food and beverage revenues increased 17 percent while retail and other operating revenues grew 33.3 percent.

"We are beginning to see more of the benefits of our targeted capital investments flow through to cash flow at The Venetian," Las Vegas Sands President Bill Weidner said. "Our increased table drop and high-end baccarat play are directly related to the investments we have made in our high-end suite, gaming and hospitality product."

Weidner said the results in Macau reflected increases in all areas of the Chinese gambling business, despite competition from the opening in September of the $1.2 billion Wynn Macau.

"For the fourth quarter in total, we captured over 19 percent of the table game market in Macau," Weidner said. "And in the month of December, our market share increased to over 21 percent of the Macau gaming market."

At the Sands Macau, casino revenues were $343.3 million, a 27.1 percent increase compared with $270 million in the same quarter a year ago.

"Both our VIP and mass businesses remain extremely healthy, our visitation statistics continue to increase, and our operating performance remains strong," Weidner said.

Las Vegas Sands expects to open two major projects this year, the $2.4 billion Venetian Macau on the Cotai Strip in late summer and the $1.8 billion Palazzo on the Strip by the end of 2007.

"They have first-mover advantage, and there's enough growth for everyone to benefit," Charles Norton, a portfolio manager for GNI Capital's Vice Fund, which has shares of the company among its $70 million in assets, told Bloomberg News. "Their biggest risk is the Cotai Strip; they're betting the farm on that."

Las Vegas Sands executives were heading to Singapore this week to formally break ground on the $3.6 billion Marina Bay Sands. The project is expected to open in 2009.

Meanwhile, the company has begun developing the $600 million Sands Bethworks in Bethlehem, Pa., a 3,000-slot machine-only casino on the site of the former Bethlehem Steel Mill.

In China, on the Cotai Strip, Las Vegas Sands will spend roughly $11 billion to develop seven hotel-casinos.

"While we have delivered superior financial and operating results, the opportunities that lie ahead, in both the short and long term, remain significant," Weidner said.

Before the company's earnings announcement, several gaming analysts weighed in on Las Vegas Sands' future earning prospects.

Bear Stearns gaming analyst Joe Greff, in initiating coverage of the company last month, said that by 2010, he expects the company's operating cash flow to grow 47 percent and earnings per share to increase 260 percent.

"This growth profile is driven by the strong return on invested capital potential associated with development in Las Vegas, Macau and Singapore, as well management's ability to opportunistically reduce its invested capital through the sale of the resorts' mall space and-or residential components," Greff said.

Goldman Sachs gaming analyst Steven Kent, in a Jan. 21 note to investors, said he believes shares of Las Vegas Sands should beat the stocks of other casino operators.

"While acknowledging that the shares have traded up more dramatically than even we predicted two months ago, we still believe that Las Vegas Sands will outperform over a more extended period of time," Kent said.

On Monday, shares of Las Vegas Sands rose 84 cents, or 0.81 percent, to close at $104.09 on the New York Stock Exchange. The company reported earnings after the stock market closed.