Stock Report: Las Vegas Sands Corp. (LVS)

Stock Report: Las Vegas Sands Corp. (LVS) - HE LVS table 1 31 14


Las Vegas Sands has transformed into that rare stock that should appeal to “Growth,” “Value”, and “Dividend/Cash Flow” investors alike.  The stock now yields higher than the S&P 500 (43% sequential quarterly dividend increase), and the company is buying back $200 million + in stock a quarter, yet still retains a pristine balance sheet.  The significant capital deployment opportunities can be funded out of annual free cash flow of nearly $4 billion. Management has indicated they are willing to raise leverage 1.5x which would still keep them well below industry average and if directed toward dividends, would result in a yield of over 6%.  And we haven’t gotten to the $10-14 billion in mall assets that could be monetized.


Along with 15-20% same store growth in Macau, investors should be focused on the upcoming high ROI opportunities for LVS which include the opening of its newest mass-centric property on Cotai – The Parisian in 2015 and potential legalization in new markets such as Japan, Korea and Taiwan.  Japan, in particular, is gaining steam as the final passage of a gaming bill by the Diet could potentially happen by Summer 2014. LVS is regarded as a highly attractive candidate for building in integrated resort in Japan given its success with Marina Bay Sands in Singapore.


We know of no other stocks in consumer land that provide this combination of cash flow, growth, cash return to shareholders, and value levers.



INTERMEDIATE TERM (TREND) (the next 3 months or more)

Macau fundamentals are outstanding and we expect an acceleration of growth in February.  Within that favorable industry construct, LVS is nailing it operationally.  The LVS properties continue to yield up their Mass tables impressively which is  contributing to higher margins.  Table yields have a long way to go and with the company’s extensive room base, cross marketing initiatives, and premium Mass push, LVS is likely to continue share growth in the rapidly growing Macau market. 


Share growth and near term strength in Macau are two near-term catalysts.  Others include potential legalization of casinos in Japan – LVS would be a leading contender to be awarded a license – and progress toward selling off the company’s significant retail mall assets.

LONG-TERM (TAIL) (the next 3 years or less)

Valuation is the main push back but with LVS’s combination of growth and cash flow, should we really be concerned with an EV/EBITDA multiple of 13x?  Certainly not, especially when considering that a good portion of LVS’s profits are not taxed (approximately 55%), a benefit that isn’t captured by EV/EBITDA. 

Future high ROI projects in Macau (The Parisian), Japan, and South Korea are also not captured.  LVS should continue to garner more widespread investor appeal with its emerging cash distribution focus (dividend investors welcome) along with the existing growth investors.  



Stock Report: Las Vegas Sands Corp. (LVS) - HE LVS chart 1 31 14

Short Kinder Morgan Thesis Update - Slides and Dial-In



Short Kinder Morgan Energy Partners (KMP) remains a Hedgeye “Best Idea.”  Our conviction has increased since first making the call in September 2013.  Recent events, results, guidance, and new information continues to indicate that our analysis is correct.


“Cheap” is a LONG WAY DOWN.  We believe Fair Values are:

  • KMI: $13 - $17/share, ~57% Downside 
  • KMP: $31 - 47/unit, 51% Downside  (Preferred Short)
  • EPB: $16 - 24/unit, 39% Downside 
  • This puts Complex EV/2014 EBITDA at ~10-11x

CLICK FOR FULL SLIDE DECK: Short Kinder Morgan Thesis Update 1/31/14



  • Direct Dial Number:
  • Conference Code: 581275# 
  • Send questions to .


Kevin Kaiser

Managing Director


$XLF Breakdown Doesn’t Bode Well

Takeaway: As the Financials (XLF) go, so goes the market.

Editor's note: The post below is a complimentary excerpt from CEO Keith McCullough's pre-market morning research. For more information on how you can become a Hedgeye subscriber click here.

$XLF Breakdown Doesn’t Bode Well - yaya 

As the Financials (XLF) go, so goes the market.


In other words, if Financials break, that’s a very bearish signal for the market’s beta. Yes, beta matters.


The XLF snapped Hedgeye’s TREND line ($21.21) this week, and barely closed above it yesterday. This is the single most important sector signal for me today.

$XLF Breakdown Doesn’t Bode Well - Beta

Why are Financials broken?


Because bond yields are falling. When bond yields fall, the yield spread compresses. The 10-year yield remains below our TREND of 2.80%. This of course is a negative for Financials on the margin.


So, whatever yesterday’s low-volume U.S. stock pop was (month-end?), it’s not popping this morning. In all likelihood, Mr. Market breaches 1,779 support on the S&P 500 if indeed the Financials are broken. 

Join the Revolution. 

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Takeaway: Spending outpaced Income as the decline in Saving supported services and nondurables consumption. Gov't sourced income inflecting positively


SPENDING:  Spending grew at a premium to incomes for a third consecutive month as the savings rate fell -40bps sequentially to 3.9%, the lowest level in a year.  


With the savings rate now back to the low end of the historical range, the capacity for Incremental savings depletion to support further improvements in consumption growth appears largely constrained. 


Household expenditure growth on Services and NonDurables accelerated, while spending on Durables – the 2013 leader as sales on higher ticket items improved – decelerated 300bps and 120bps on a 1Y and 2Y basis, respectively.  Whether the nascent deceleration in Durables represents a pull-back in spending across the higher income brackets remains TBD.    


INCOME:  Personal income growth, Disposable Personal Income (DPI) Growth, and Real DPI per capita all decelerated on both a 1Y and 2Y basis. 


Note that the December comp dynamics were impacted by the conspicuous pull-forward in compensation that occurred at year-end last year ahead of the fiscal cliff resolution and impending tax law changes.  Given the comp distortion, the 2Y comp offers the cleanest read for December and on that basis growth decelerated a moderate 20bps sequentially from +3.8% to +3.6% (vs. the reported -0.8% on a YoY basis).


Salaries & Wages:  Private sector salaries & wages slowed modestly in December while the slope of the broader trend remains positive at ~5% YoY on a 2Y basis.   


The other notable dynamic is that government sourced salary and wage income is inflecting positive for the first time in years. 


State & local government employment was positive for the 5th consecutive month in December (after 4 years of negative growth) and the ebbing of the fiscal drag alongside the spending friendly budget deal has aggregate incomes for government workers - which represent ~17% of labor force and ~17% of aggregate wage/salary income – beginning to show some positive mojo.


INFLATION:  PCE and Core PCE inflation both a little firmer sequentially, but still well below target.   The longer we mark time sub-target the more worrying it becomes for policy makers.  Expect speculation around an “inflation floor” to pick up as the Yellen transition matures.







CONFIDENCE:  This morning’s final estimate of confidence from the Univ. of Michigan capped the January data on consumer sentiment.  Across the primary survey’s, the results were mixed on a Mom basis with the Conference Board estimate advancing 3.2 pts while the Univ. of Michigan and Bloomberg readings declined a modest 1.3 and 1.1 points, respectively. 


The middling confidence numbers make sense in the context of the quantitative setup for the $USD and the TTM relationship between sentiment and the currency.  The dollar is currently neutral on a TRADE basis from a quant perspective and searching for some direction as it flirts with a breakout above the 81.12 TREND line.







Christian B. Drake



[video] Keith's Macro Notebook 1/31: FINANCIALS JAPAN COPPER

MTW: Exiting Following Solid Beat





Our MTW thesis based on its exposure to a recovery in construction and break-up value (see 10/28/13 “MTW: Next Activist Value Target?”) has played out well.  Given current market prices, the shares have entered our fair value range in a softer equity market and potentially less attractive macro environment.  We also would prefer to own OC (and potentially other building products names) at current levels for construction exposure, rather than MTW at ~$27.60.  We are not signaling an MTW problem/short/sell, but rather responding to our repricing thesis working out in a market offering some better construction-exposed opportunities.  If MTW shares retreat, we would look to re-enter, with our thesis put forth in our March 2013 Mining & Construction Equipment black book.



Quick Take


  • Solid Beat:  MTW readily exceeded expectations for the quarter, principally on 10% revenue growth in Foodservice Equipment amid solid margin gains.
  • Both Segments Grow: Excluding $120 million shift in 2012 Crane revenues between quarters, the Crane segment showed 4Q growth of 9.3% - consistent with other strong construction equipment sales readings.
  • Less Under Recognized:  MTW is better recognized today, with several of our catalysts having occured (e.g. the redemption of a high cost/problematic covenant tranche of debt has now been announced.)
  • Better Options:  We see OC as a better exposure for 2014 from current levels to a construction rebound following MTW’s ~35% total return since late October (vs. a roughly flat S&P 500).

MTW: Exiting Following Solid Beat - lkj


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.47%
  • SHORT SIGNALS 78.68%