Comments from Mike Leven and Ken Kay
INVESTMENT CASE FOR LVS (MIKE LEVEN)
- LVS is one of 16 companies with a market cap > $10BN with a projected Revenue CAGR > 20% from 2011-2013E and one of 6 companies with a 2013E FCF > 8%
- Have a very seasoned management team in case anything happens to Sheldon
- The management team's job is to execute on Sheldon's vision
- 2Q11 EBITDA: 45% Singapore, 43% Macau, 10% Las Vegas, 2% PA (88% from Asia)
- Opening of Sands Cotai Central at the end of 1Q12; it will be the only new opening for at least 4 years
- Looking at development opportunities in jurisdictions considering gaming expansion: Japan, Korea, Vietnam, Taiwan, and Europe
- Consensus for 2012 EBITDA: $4,073MM ($1.9BN for Macau, $1.7BN at MBS, $385MM for Vegas, and $96MM for PA)
- Organic growth opportunities in all their operating jurisdictions
- Macau: improving VIP competitiveness and expansion of regional transportation infrastructure
- Singapore: Broadening and deepening VIP expansion; MTR train opening in 1Q12 right by their property and the opening of the deep water cruise terminal in 2012
- Vegas: refurbishment and renovations
- PA: retail mall outlet opening
CASH FLOW AND LIQUIDITY (KEN KAY)
- Expect further economies of scale on the cost side when Sands Cotai Central opens
- CAPEX: 2011E: $1,545; 2012E: 1,462MM; 2013E: $893MM (40% maintenance - $350-400MM per year or 3% of revenues)
- In 3Q11/4Q11, they will refinance VML/VOL credit facilities which are complete but waiting for Macau government approval; in November 2011, they plan to redeem $712MM of preferred stock; and in 2012, they will refinance the Singapore Credit facility.
- By 2013, assuming no new developments, they will have no net debt (or $729MM of net leverage of .2x)
- FCF yield should be 9% by 2013 or $3.1BN
- Cash Balance projected to be $5.6BN in 2012 and $8.14BN by 2013; +$1BN of R/C capacity - so they will be in a very unique position to pursue a number of development opportunities
- They will use this cash in new developments and return cash to shareholders through dividends and stock buyback as well as debt reduction
- Future development projects will be developed with 25-35% equity
- Working on the tax efficient repatriation of cash flow, They have $450MM of NOL's; $1BN may be repatriated from MBS and nearly $6BN of foreign tax credits generated from the Macau gaming taxes paid that can offset tax liabilities.
DEVELOPMENT OPPORTUNITIES
- Have been in the process of retooling their development department led by Mike Lentz
- Steps: Strategy/ Opportunity Definition; Feasibility assessment; Concept development; Negotiations; Design Development; Execution
