Las Vegas Sands Has Many Ways To Assemble A Winning Hand

| About: Las Vegas (LVS)

"The race is not always to the swift nor the battle to the strong, but that's the way to bet." ~Damon Runyon

I have not written about Las Vegas Sands (NYSE:LVS) in quite some time. It has not been one of the stars in my portfolio since I bought a stake in this large casino operator earlier in the year and I am down some ten percent on this position after averaging down. I still believe in the company's long term growth story and the stock has had some positive catalysts recently. In addition, it has evolved from strictly a growth play to also a bet on increasing dividend payouts and is now a part of my income portfolio as well. It is my favorite backdoor dividend play.

Key recent catalysts for Las Vegas Sands:

  • Penn National Gaming (NASDAQ:PENN) soared almost 30% on Friday after announcing it plans to put its casino properties into a REIT structure. This decision also buoyed the entire sector as it showed these properties are undervalued. Although I don't expect Las Vegas Sands to pursue this avenue anytime soon given its ownership structure, it should help put a floor under the stock.
  • LVS recently decided to initiate a dividend for a first time in 2012 with a quarterly payout of $.25 a quarter. I do expect the company to look to use its prodigious cash flow to increasingly reward these shareholders with income streams. It just announced a 40% hike to its dividend starting in 2013.
  • Now that the leadership transition is complete in China and the country looks like growth there has bottomed, consumer demand should be on the rise. Given the company's properties in Singapore (where it is a duopoly) and Macau (where no new significant capacity comes online until 2015), LVS should be a major beneficiary of this demand.
  • Now that the election is over, I would look for Federal authorities and the company to quickly settle money laundering charges. This should remove a recent overhang from the stock.

Las Vegas Sands Corp owns, develops, and operates various integrated resort properties primarily in the United States, Macau, and Singapore.

6 additional reasons LVS is a solid buy at $42 a share:

  1. The company has grown earnings and revenues at better than a 20% annual clip over the past five years. LVS should post mid double digit revenue increases for both FY2012 and FY2013.
  2. The median price target held by the 24 analysts that cover the stock a $51.50 a share. Credit Suisse has an "outperform" rating and a $53 target on LVS.
  3. The company has robust operating cash flow and just initiated a dividend payout which currently provides a yield of 2.4%. With the new dividend payout beginning in 2013, it will yield 3.3%.
  4. The stock is selling in the bottom third of its five year valuation range based on P/E, P/S, P/CF and P/B. It has more than quadrupled its operating cash flow over the past three years.
  5. LVS is selling at 16x forward earnings, a discount to its five year average (44.0).
  6. The stock has solid technical support less than 10% below its current level (See Chart)

Disclosure: I am long LVS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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