With the 2008-2009 bear market now three years in the rear view mirror, it is sometimes fun to go back and see how stocks have performed since those market lows. Using an semi-arbitrary start date of March 20, 2009, the U.S. stock market - as indicated by the S&P 500 - is up about 90 percent. Not too bad for a three-year return. However, investors who were brave enough to pick up shares of Las Vegas Sands (LVS) in those dark days of March 2009 are now sitting on a 20-fold gain in value. Yes, a 2,000 percent plus return. For another comparison, over the same time period shares of Apple (AAPL) are up 550 percent. The good news is that investors can still invest in Las Vegas Sands and participate in some tremendous growth - maybe not 700 percent per year, but 30 to 50 percent annual gains seem very possible.
The Sands' growth has been propelled by the company's gaming and hotel properties in Macau, China. The company opened its first Macau property in 2004 and the third and most recent in the second half of 2008. In 2011, Las Vegas Sands generated 45 percent of total company EBITDA. For 2011, the company controlled about one-third of the Macau gaming and hotel market. The Marina Bay Sands in Singapore opened in mid-2010. By the fourth quarter of 2011, the Singapore operations generated as much EBITDA as the Macau casinos. With the opening of new properties and growth in existing properties, Las Vegas Sands has produced a $2.5 billion per year turn around in free cash flow in just two years - from a negative 1.4 billion in 2009 to positive cash flow of $1.15 billion in 2011. The company forecasts cash flow of close to $4 billion in 2014.
2012 will be a year of continued expansion for the Sands. Next week - April 11 - the first phase of Sands Cotai Central on the Cotai Strip of Macau. Phase two opens in the second half of 2012 and the final phase three in early 2013. This will be the last new property opening in Macau for the next three years. Once Sands Cotai Central is fully up and running, Las Vegas Sands will own approximately 40 percent of the Macau gaming facilities. The governments of both China and Singapore are rapidly expanding transportation facilities to bring more tourists and gamblers to Macau and Singapore, respectively. Even without additional construction after 2013, there is tremendous growth potential in these markets. Sands literature notes that 6 billion people live within a 5 hour plane flight of Singapore. Visitor growth to Singapore is growing at double-digit rates and currently one million visitors a month visit the city-state.
Following on its successes in Macau and Singapore, Las Vegas Sands plans to take its success formula to more international markets. Future development locations listed by the company include a third parcel in Macau, South Korea, Vietnam, Japan and Europe. The most recent news is the ongoing negotiations in Spain to build a $20 billion, 12 hotel EuroVegas project. Sands Chairman and CEO Sheldon Adelson has stated the company will make a decision whether the Spanish project is a go some time in April or May (2012).
A final cherry on the Las Vegas Sands growth prospects would be a recovery in the Las Vegas gaming market where the company owns two major gaming properties. In 2011, the Las Vegas operations only accounted for less than 10 percent of EBITDA in the fourth quarter of 2011. Profits from Vegas could expand significantly with just a modest recovery in Nevada gaming results.
The Las Vegas Sands has been able to position itself as the only gaming, hotel and casino company with the financial strength to handle developing a major resort property. Wynn Resorts (WYNN) has done well in Macau, but does not have the financial resources to compete with the Sands. So if any country wants to bring develop a gaming attraction as a way to boost employment and tax revenues, Las Vegas Sands will most likely be the developer and end owner of the properties.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.