Buy: Las Vegas Sands
Las Vegas Sands (LVS) is one of the world’s biggest casino operators for a very good reason — Sheldon Adelson. While everyone else was focused on Vegas and other cities across America, Adelson was busy pushing into Macau, which is now the world’s busiest casino market by a long shot. Forbes called it “Vegas on Steroids” in an article about the former colony’s gaming market.
In its Q3 ended Sept. 30, LVS generated 66% of its $3.6 billion in revenue from Macau and another $774 million from its Marina Bay Sands property in Singapore. Its U.S. properties generated just 14% of revenue and, more importantly, just 9.2% of its $1.3 billion in adjusted property EBITDA.
The U.S. is an insignificant piece of its business, although you can bet Adelson will jump if he thinks its potential improves. In the meantime, LVS has a Singapore property whose adjusted property EBITDA margins are 50% higher than in Macau. Macau might be number one, but its Marina Bay Sands property is the real star.
In early September I recommended investors buy LVS stock. Since then, LVS is up 20% through Nov. 25, compared to 10% for the SPDR S&P 500 (SPY). Year-to-date it’s up 55%, 26 percentage points higher than the SPY. The entire casino sector has done well in 2013 with the Market Vectors Gaming ETF (BJK) up 39%. As long as gamblers keep flocking to Macau (which they will), LVS is in great shape heading into 2014.