Las Vegas Sands Reports Stellar Profits From Macau

| About: Las Vegas (LVS)

By Sean Geary

Gaming company Las Vegas Sands (NYSE:LVS) reported both its quarterly and annual results Wednesday afternoon; the firm had massive profits, thanks to strength from its casinos in Macau. The company earned $434.8 million, or 53 cents per share for the quarter, up from $320.1 million, or 39 cents per share, in the same period last year. Fourth quarter net income jumped 35%. Sands China, the company’s Macau division, saw its quarterly profits jump 52% and revenues jump 48%.

After a relatively tough year in 2012 when Asian economies slowed, the company’s recent performance in Macau is indicative of a rebounding Chinese consumer as the Mainland economy (NYSEARCA:FXI) continues to strengthen. As we’ve noted here at Emerging Money, casino stocks are well poised to take advantage of Chinese consumers with discretionary income.

While many Macau-based casinos have concentrated most of their efforts the on lucrative VIP segment, Las Vegas Sands has diversified operations by trying to target the mass market in addition to high-rollers.

In addition to its incredibly successful Venetian complex, the company’s newest offering, the Sands Cotai Central, attracted more than three million visitors in 2012. With the company’s plans to build a Paris-themed casino, Las Vegas Sands should be able to maintain its pole position in the mass-market segment of Macau gaming.

After beating estimates, Las Vegas Sands’ stock jumped 5% after-hours. While the company remains reasonably valued, trading at roughly 17 times forward earnings, the stock has been on quite a run recently: Las Vegas Sands is up 15% over the past month and 40% over the past six months.

Although the company remains a compelling long-term story, the stock has traded consistently for the past few years. The stock has previously found strong resistance in the 55-62 range, frequently pulling back before finding support in the low 40s or high 30s.

If the stock were to break through 62, Las Vegas Sands could trade much higher; however, an inability to get above 62 could be a signal that the stock will eventually move back down to previous support when a new long position offers a more favorable risk/reward proposition.

Disclosure: Author and family are long LVS; author may sell covered calls in the next 72 hours.