Are You Ready for this Amazing Gamble?
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Macau has been the center of attention for all the casino resort players since it’s the biggest gambling destination and the only one in China. Each player is trying his hands in the region, making the competition quite stiff. However, due to economic slowdown and restricted spending by the customers, casino companies such as Wynn Resorts (NASDAQ: WYNN) are having a tough time. Wynn’s third quarter results were hampered by its operations in Macau. Lower footfall in its casinos in Macau played a major role in dragging down revenue, which was luckily offset by stellar performance by its Las Vegas operations.
On the other hand, Las Vegas Sands (NYSE: LVS) has been witnessing great results from its Macau operations. Its results in the region are getting better with each passing day, leading to increasing market share. All thanks to its rigorous efforts to outperform its competitors. This was affirmed by its third quarter results posted last week. Though the results were not as expected, a prudent investor will be able to foresee significant opportunities to cash in on.
A Snapshot of the Quarter…
Revenue grew 12.5% to $2.71 billion over last yea,r driven by increasing revenue from casino resorts in Macau, which constitutes 60% of Las Vegas Sands’ total profits. Though revenue from VIP tables shrunk, Las Vegas Sands’ new resort, which made its debut early this year, compensated easily. However, key reason for the drop in revenue from VIP tables was because of renovation at the clubs, which decreased the number of active tables.
Moreover, the new resort caters to the mass market, which includes the middle class tourists which boosted its performance. This was indeed a smart move by the casino resort operator since it diversifies its risk by catering to a large variety of population.
However, the company’s Singapore operations lagged. Key reasons for the same was higher customer wins, which pulled down revenue. Also, revenue from food and beverage were lower, which weighed heavy on the results.
Las Vegas Sands was also very active on the marketing front, which is expected to gradually bear fruits. For example, its marketing strategies in Singapore, such as adding more shows and sales representatives to its casinos, will help boost its results.
The casino chain operator is up for a number of moves that can prove to be beneficial. For example, along with increased marketing efforts in Singapore it plans to open a new mall in Macau. Macau is the largest and the most profitable market, and the company is trying to make the most of it.
It plans to expand further in the region by opening its fifth resort, called “The Parisian,” which will again cater to the huge middle class population. Expanding in this segment is better since the high-end segment is very small in size and highly dependent on the economy.
The company also plans to further expand its wings internationally, with a main focus on the Asian region. It intends to expand in countries such as Japan, Korea, and Taiwan, where it foresees great opportunities.
However, Las Vegas is not alone in its expansion moves. Its competitors, such as Wynn Resorts and MGM Resorts (NYSE: MGM), are also planning to increase its footprint, especially in the popular Macau region. Not only Wynn Resorts but also MGM Resorts is planning to open another casino resort in Macau. Even MGM is facing difficult times because of weakness in the Asian region. It posted a disheartening third quarter owing to lower revenue from Las Vegas and Asian operations. However, it is doing well in China. Hence, it is intending to expand in the region.
The Bottom Line
Las Vegas Sands is the strongest player among its peers and is expected to continue to do well, given the strategic moves planned for the future. Its new Cotai resorts for the lower income group and great promotional efforts will drive revenue and margins further. After the success achieved in the existing regions it plans to conquer the international markets further, which makes its future brighter. I think investors should not ignore this growing gambler.
Know What You Own
For many companies, successfully capitalizing on a booming Chinese economy is like winning the jackpot. That's literally the case for gaming company Las Vegas Sands, which made a big bet on Macau gaming about a decade ago that's paid off in spades. The company is now looking to spread its empire further, but will it be able to replicate its prior successes? Learn about all these opportunities, and the risks they pose, in the Fool’s brand new premium report on Las Vegas Sands. We're providing a full year of analyst updates to go with it, so make sure to claim your copy today by clicking here.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.