Las Vegas Sands Corp. (LVS) $129• The skinny
A major player in Macao with a $2.4 billion, 32-story Venetian. I stayed in the Las Vegas Venetian about eight years ago for a conference. (Free for me, of course. I'd never spend that kind of money for a place I hardly stay in.) We spent so much time in seminars that all I saw of my opulent room was a few minutes before sleeping and a few minutes after waking up. I did enjoy the incredible beauty of the hotel, though.
• Earnings
Numbers are bullish for 2008.
• Fundamentals
See the numbers at Yahoo Finance.
Solid margins. No question, earnings growth and cash flow numbers were hit by the buildout in Macao.
• Chart
LVS has exploded in the past two weeks, from an 87-110 range to the current 129. Trading far above its simple moving averages.
• News
1. LVS is raising $3.3 billion in loans to build in Singapore, according to a story on Friday.
SINGAPORE (Dow Jones)--U.S. gaming giant Las Vegas Sands Corp. (LVS) has mandated eight banks to arrange a S$5 billion ($3.3 billion) debt facility, the largest high-yield syndicated loan for a project in Asia ex-Japan in several years, two bankers close to the deal said Friday. Las Vegas Sands will use the money for the construction of the Marina Bay Sands casino in Singapore.
See a photo of the Marina Bay Sands in Singapore, due to open in 2009.
2. S&P downgraded LVS on Thursday.
The shares have doubled in the past year and appreciated nearly 39% over the past month. Now, with shares sporting a price 139X trailing earnings, we see them as significantly overvalued. While LVS will likely enjoy benefits of its development projects, including possible rapid EPS growth, the shares are nonetheless priced at nearly double the peer-average P/E ratio on '08 EPS. We lower our assumed weighted-average cost of capital and, following LVS's early successes in Macau, we are boosting our target price by $17 to $117. But at current market prices, our opinion is sell.
I don't consider LVS a screaming buy, nor do I think it's forgettable at these levels. This is clearly tied to the US and Asian economies, and certainly a way to play the China market. I think Macau is golden. Even if the US economy slows, the coffers of average and high-end Chinese citizens are growing by leaps and bounds. Some of those high-end folks will filter down to Macau and add to LVS revenues. Hard not to like this stock. Just not at this current level.
Grade: B+. There are clearly questions about an oversaturation of hotel rooms in Macau. I'm optimistic, but cautiously so. Pupule says: Wait.
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