LVS: A HOLD-AIDED MAKE

EBITDA would’ve been 8% lower with normal hold.  In this note, we focus on two forward issues for LVS.

 

 

We don’t want to bore you with the details of LVS’s Q4 – there’s plenty of sell-side research that can do the trick better than we can (I mean, the boring part).  The quarter was not as good as we were projecting.  Moreover, the quarter benefited from high hold, the net impact of which boosted company EBITDA by $69 million (8% of total).  Worse, the property we are most concerned about vis-à-vis expectations, MBS, was the beneficiary of most of it.

 

LVS is in great shape over the long-term.  No question.  We would be buyers of the stock at this price for the long haul.  However, it is the near and intermediate term that concerns us.  Our near-term focus is on two issues:  2012 growth in the Singapore market and the cannibalization at Venetian from Sands Cotai Central.

 

So what did we learn from this quarter related to these two issues:

  1. MBS Singapore – Q4 YoY EBITDA growth was 40%. Fantastic. However, it was 71% in Q3. EBITDA only grew 3% QoQ. Worse, on a hold adjusted basis for both quarters, EBITDA would have fallen 13% QoQ. So is seasonality to blame? Certainly, that is a factor.  But that isn’t all of it.  Singapore growth is likely slowing.

     

    Of course, Q1 has a very easy comparison due to low hold and the newness of the market in Q1 of last year.  Q1 2011 EBITDA was only $285 million. However, on a hold adjusted go forward basis, we think top line growth of 5-10% for the market is more likely than the 15-20% expected by the Street.  Beyond Q1, we see EBITDA growing only 5-10% YoY. This could be a disappointment.

     

  2. Sands Cotai Central will open in March or April.  Given the overlap with Venetian, we are expecting cannibalization. With its new focus on the VIP, Four Seasons should be fine.  So what can we learn from Q4? Well, Venetian and Sands are badly trailing the market in revenue and EPS growth.  Given past cannibalization (Venetian on Sands, Grand Lisboa on Lisboa, and CoD on Altira), we have little reason to believe that these numbers are going to improve upon the opening of a sister property.  Four Seasons is on a different path because of its new focus on VIP.

The following table outlines the property performance for the quarter.

 

LVS: A HOLD-AIDED MAKE - LVS


Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more