The decline in revenues in its second largest market drove the world's largest casino company, Las Vegas Sands Corp (LVS), to fall short of analysts' expectations. In the fourth quarter 2013 earnings results the company trailed analysts' estimates on both the revenues and per share earnings even though both its top and bottom lines have shown considerable year-over-year growth this quarter.
Las Vegas' revenues during the fourth quarter rose 18.8% to $3.66 billion compared to the analysts' consensus of $3.71 billion. The adjusted per share earnings rose to 70 cents per share compared to the analysts' consensus of 84 cents per share.
Revenue and EBITDA Growth
The 18.8% jump in revenue includes a 21% jump in casino revenues. Las Vegas Sands' revenue growth during this quarter was primarily supported by higher customer spending in rooms and food and beverages. Macao, the company's largest revenue generating segment and the only region in China where gambling is legal, has recorded the most outstanding growth of all the segments.
The mass win in Macao increased by 58.3% to record $1.22 billion from $770 million generated during the fourth quarter of 2012. The mass table revenue for the company increased at a faster pace than the overall industry which had an average growth rate of 46.9% during this period.
Source for all graphs are: Earnings Slides
Las Vegas Sands' rolling volume has also increased at a faster pace than the Macao market. The YoY growth recorded for rolling volume is 26%. Slot and ETG win grew in line with the Macao market whereas the mall revenue significantly increased by 38.7%. The company's mass table and slot revenues in Macao have grown 16 quarters in a row and now approach $1.4 billion per quarter exceeding all the industry peers.
During the quarter there were more than 17 million visits to the Las Vegas' Macao property and this resulted in a record $835.9 million of adjusted property EBITDA.
Unlike Macao, the company's second largest market, Singapore, displayed a slightly disappointing performance. The segment's rolling volume decreased 16.6%. However, this was offset by a mass table revenue increase of 3.6%, slot revenue increase of 2.4%, and room revenue increase of 13.8%.
The Las Vegas Asian retail mall segment has also shown excellent growth in the year-over-year gross revenues. The segment's gross revenues in this quarter jumped 24.1% compared to the fourth quarter of 2012.
The company's total EBITDA in this quarter was $1.152 billion compared to $933 million during the corresponding quarter of the previous year reflecting a YoY growth of 23.5%. However, the EBITDA margin in this quarter dropped by 350 basis points due to higher resort operations expenses compared to 4Q12.
However, the company's full-year 2013 EBITDA margin jumped slightly by 50 basis points. Las Vegas Sands' EBITDA has grown at an impressive CAGR of 44.17% over the last five years. The EBITDA for 2013 was $4.76 billion reflecting a growth in the company's revenues and reduction in expenses as a percentage of revenues. The company's full-year revenues in 2013 grew 23.7% reaching $13.77 billion. Over the last five years the revenues have grown by 31.8% on the back of a strong business model.
Las Vegas Sands' net earnings during this quarter grew to $578 million or 0.70 cents per share compared to $435 million or 53 cents per share during the fourth quarter of 2012 reflecting a year-over-year growth of around 33%. Excluding the negative impact of non-recurring items, the company's quarterly per share earnings rose 72 cents per share. The hold-normalized per share earnings were 82 cents per share. The company's net margin improved around 167 basis points despite the lower EBITDA margin in this quarter. The factors supporting this improvement are lower depreciation, amortization and interest expenses as a percentage of revenues.
The full-year net earnings made a significant jump and reached $2.31 billion or $2.79 per share from $1.52 billion or $1.85 per share in 2012 reflecting a growth of 51%. The higher revenue growth along with the improved EBITDA margin and lower interest expense supported the company's full-year earnings growth. The full-year net margin improved around 306 basis points.
Over the last five years, Las Vegas Sands' net earnings have grown at a CAGR of around 166% and diluted per share earnings have grown at a CAGR of around 154% depicting strong operational performance and efficiencies.
Las Vegas Sands' balance sheet has grown healthier in 2013 compared to last year as the company now has more unrestricted cash and a lower amount of debt on its balance sheet. Also, the amount of net debt was significantly reduced during this year.
The net debt-to-EBITDA has dropped in 2013 showing the company's improved ability to decrease its debt. In December 2013, Las Vegas Sands had its credit ratings increased to investment grade by the Standard &Poor's Index. According to the S&P the company's debt-to-EBITDA ratio will remain below 2.5 which is quite satisfactory.
During the fourth quarter of 2013, Las Vegas Sands paid diluted dividends of 35 cents per share compared to 25 cents per share (excluding special dividends) during the fourth quarter of 2012 reflecting a YoY growth of 40%. Full-year 2013 the company paid $1.40 per share compared to $1 per share. For 2014, the company's Board of Directors has declared a full-year per share dividend of $2 reflecting a YoY growth of approximately 43%.
In 2014, Las Vegas Sands' dividend yield would be 2.7% which would be greater than the forward dividend yield of 2.2% provided by the S&P 500 index.
Las Vegas Sands also planned a share repurchase program of $2 billion and it bought $570 million worth of shares in 2013. The remaining $1.43 billion shares will be bought in 2014 with a commitment to buy at least $75 million of the stock each month.
Positive Future Outlook
Las Vegas Sands' top line is anticipated to grow in the future on the back of strong growth in the Asia Pacific market. The region's market is currently the fastest growing casino gaming market with a 23.6% increase compounded annually from 2009 to 2014. As Las Vegas Sands generates a major chunk of its revenues from Asia Pacific region and is further expanding its operations in the region, a growth in the region's casino gaming market will definitely add growth to the company's net revenues.
Moreover, the rising middle class in China is leading the increase in disposable income and consumer spending and the transportation connectivity will also help the company in generating higher revenues in the future. Las Vegas Sands' diversification and expansion of its portfolios will also help in attracting more customers.
Las Vegas Sands is currently in the best position to reap the benefits from the favorable scenario in the Asia Pacific casino gaming market. The company gave its best shot in year 2013 and is expected to continue its performance in the coming years. It has a very healthy balance sheet that will help it meet its short- and long-term obligations and pay dividends to investors. Therefore, based on the company's excellent performance in 2013 and positive future outlook I would recommend buying the stock.
Note: Source for all graphs in this article: Earnings Slides