One of the best ways for investors to gain insight into a
company's operations is through the conference call and questions
and answer session companies usually conduct after issuing
quarterly earnings. Gaming companies use these events to provide
specifics on new projects and to update operational details
that can be key for investors over the long term.
Las Vegas Sands
, the conference call is one of the best times to get insight
from industry visionary Sheldon Adelson, the company's CEO and
majority shareholder. Here are five takeaways from Adelson's
discussion ofthe second quarter.
A rendering of The Parisian in Macau. Source: Las Vegas
Market share is growing
"During the quarter we again outpaced the market in terms of
gaming revenue growth. Our growth gaming revenue was up 12%
versus the market that was up 5%."
In a market like Macau, the key to success is gaining market
share. A company that can build resorts that attract more
customers than its competitors will win more at the tables, have
more hotel guests, and make more money from entertainment
Las Vegas Sands is gaining share in large part because it is
finishing its Cotai Strip strategy, completing Sands Cotai
Central and now constructing The Parisian. This critical mass of
resorts will give the company a major draw to the Cotai Strip,
which is where it's winning the battle of the mass market.
Mass market gaming tables continue to be packed in Macau.
Source: Las Vegas Sands.
Mass market is Las Vegas Sands' focus
"For the second quarter our gaming revenue mix was 44% VIP and
56% non-VIP whereas the Macau market, the overall Macau market
was 60% VIP and 40% non-VIP. The VIP segment represents just 17%
of our departmental profit in Macau."
One of the keys to Las Vegas Sands' Cotai Strip strategy is
its focus on the mass market. The Venetian Macau, Four Seasons
Macau, and Sands Cotai Central provide thousands of hotel rooms
for guests and space for mass-market gaming, which provides
higher margin than VIP play.
Recently we've also seen mass-market play grow more quickly
than VIP play, which is actually declining this summer, and that
has been a boon to Las Vegas Sands over its competitors. For the
long term, this focus on the mass market should help the company
smooth out results, as millions of patrons will now be coming
from mainland China and elsewhere around Asia to play at the
company's gaming tables in Macau.
There's a corruption crackdown in China, not
"The press has extensively reported a crackdown of corruption in
the PLC, not in Macau. As in the past as I have experienced, that
type of criton creates uncertainty, and that uncertainty
temporarily slows the VIP market in Macau. Let me emphasize --
it's temporary and it's cyclical."
As gaming revenue has declined in Macau in recent months, one
cited cause has been a crackdown on corruption in China. But
Adelson wants investors to know what this is happening within the
People's Republic of China and not Macau.
Such events take place periodically, and gaming will suffer
over the short term. But when gamblers and junkets regain
confidence they head back to the gaming tables. Adelson and
others in the industry think it's just a matter of time before
Marina Bay Sands will be used as an example of what Las
Vegas Sands is capable of in regions considering gaming.
Source: Las Vegas Sands.
Singapore is a showcase for future markets
"Marina Bay Sands serves as the most important reference site for
emerging jurisdictions anywhere in world but considering
large-scale integrated resort developments, particularly
As countries such as Japan and South Korea consider expanding
gaming with multibillion-dollar integrated resorts, Las Vegas
Sands will use Marina Bay Sands in Singapore as an example of
what it can bring to the table. The resort has become an icon of
the Singapore skyline and has brought conventions and major
entertainment shows to Singapore.
Few companies can showcase the kind of venue Las Vegas Sands
offers in Singapore, so it's important to have the resort as a
model for winning future gaming bids.
Las Vegas Sands is returning billions to
"Over the last 10 quarters through June 30, 2014, we have
returned $8.3 billion to our shareholders through dividends and
stock repurchases, including over $6.7 billion to Las Vegas Sands
shareholders, and then Hong Kong Dollars, the equivalent of
overall $1.5 billion to the non-LVS shareholders of Sands
Until recently, gaming companies weren't known for returning
money to shareholders with either dividends or share buybacks.
They were focused on expansion, and more were highly leveraged as
But the success of resorts in Macau and Singapore has provided
so much cash that companies like Las Vegas Sands are now focusing
on returning cash to shareholders. Given the long-term cash
generation potential of Las Vegas Sands' operations I would view
dividends and even share buybacks as an important part of any
investment in the company.
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5 Things Las Vegas Sands Management Wants You to
originally appeared on Fool.com.
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