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Las Vegas Sands (LVS) reported its earnings for 2Q2012 on July 25, 2012, in which its adjusted diluted EPS of $0.44 for the second quarter showed a decline of 18.5% compared to 2Q2011, and a decline of 37% compared to 1Q2012.

The company reported net revenue of $2.58 billion in 2Q2012, signaling an increase of 10.1% compared to 2Q2011's net revenue of $2.35 billion. However, the reported net revenue was at a 6.5% decline as compared to $2.76 billion for 1Q2012.

The reported EPS for the second quarter was 27% below the mean analyst earnings expectations of $0.60 per share.

Reasons for Earnings Falling Short of Expectations

The earnings decreased due to low hold (winnings from gamblers) on table games from its casinos in Macau, Las Vegas and Singapore. Other factors contributing to the lower earnings were increased legal costs and higher provision of accounts receivable from the Marina Bay Sands in Singapore.

Regional Performances

Macao

LVS witnessed stronger gaming volumes across their property portfolio with the adjusted property EBITDA being $429 million, showing an increase of 9.6% as compared to the same period last year. The EBITDA margin for the quarter was 29.5%. All segments of the gaming business witnessed strong growth, as rolling volumes increased 36.3% to reach a record high $33.35 billion; slot handle volumes increased 72.5% to reach a record $2.63 billion, and non-rolling volumes increased 20.9% to reach a record $2.22 billion. The overall market share of LVS in the gross gaming revenue of Macao increased to 17.7% for the second quarter of 2012, as compared to 16% in the same period from last year.

Singapore

In Singapore, the Marina Bay Sands witnessed a stable financial position, showing growths in the retail and hotel segments. However, the low hold on rolling tables, lower rolling volumes, and higher provisions for accounts receivable adversely affected the quarter's results. The Marina Bay Sands generated an EBITDA margin of 47.6% and adjusted property EBITDA of $330.4 million for 2Q2012.

Las Vegas

The Palazzo and Venetian produced an adjusted property EBITDA of $64.4 million for the second quarter. The hold (winnings from gamblers) and table games play decreased with the exception of an increased Baccarat play and slot play, which shows the conditions in the Las Vegas market.

Bethlehem

The Sands Bethlehem generated an adjusted property EBITDA of $26.9 million for the second quarter of 2012, showing an increase of 28.1% from the same period last year. The growth was due to hotel revenues, slot handle and table games play. The events center started its operation in the second quarter with a strong start, and is expected to continue to do so in the future.

Important Developments for Quarter

LVS successfully opened the first phase of the Sands Cotai Central, which is expected to benefit the company's profitability with the opening of its other phases. The company witnessed an increase in its 2Q2012 gaming volumes and revenue due to the opening of this property.

Outlook

As mentioned in our previous report, the link to which is given below, LVS may be negatively affected by visa restrictions being imposed by China's province of Guangdong for visitors to Macao. We believe an economic slowdown in China will also impact the revenues of the Gaming Industry in Macao, as well as LVS. The increasing competition in Macao will have a negative impact on the company's profitability.

LVS is trading at a cheaper P/E of 14.18x as compared to its competitors and offers the highest dividend yield of 2.67%. We currently advise investors to avoid a position in the stock due to the uncertainty surrounding it at present.

See also our report, "Gambling In Macau To Suffer In Future?"

Name

Ticker

P/E (X)

EPS ($)

DPS ($)

Dividend Yield (%)

ROE (%)

P/B

P/S

Las Vegas Sands Corp

 

14.18

1.56

1

2.67

20.78

3.93

3.28

Wynn Resorts Ltd

(WYNN)

16.96

4.88

2

2.16

28.35

4.46

1.77

MGM Resorts International

(MGM)

-20

5.55

--

--

69.07

0.74

0.57

Source: Color On Las Vegas Sands Earnings Miss