Don’t expect Las Vegas Sands to jump into the much-discussed casino acquisition market.
Instead, the company’s focus is on making more than $5.5 billion in renovations and expansions to its existing resorts in Macau and Singapore, which, combined, provided the Las Vegas-based gaming giant approximately 85 percent of its total quarterly revenue stream.
Sands Cotai Central
In response to a question during Wednesday’s quarterly conference call about acquiring multiple casinos or a rival gaming operator – either of which would be a multi-billion-dollar effort – company executives said they would rather focus efforts on long-term growth markets.
“For us, it’s really tough to get comfortable with an M&A opportunity, given how successful we have been doing what we’ve been doing,” said Las Vegas Sands Chief Financial Officer Patrick Dumont. “I think it’s hard to look at those opportunities and say that they are a better use of our capital than what we can do with our development capabilities.”
The question was raised following last week’s reports that Wynn Resorts was negotiating to acquire Australia-based Crown Resorts. After Crown acknowledged the talks publicly, Wynn walked away from any potential deal.
Meanwhile, MGM Resorts International has acquired gaming properties in New York and Ohio during the past year, Caesars Entertainment is up for sale, and regional casino operators Penn National Gaming, Boyd Gaming and Eldorado Resorts have all expanded through acquisition.
Las Vegas Sands President Rob Goldstein
Las Vegas Sands, meanwhile, is in the process of selling its Pennsylvania casino to an Alabama Indian tribe even as it remains focused on expansion in Asian markets, which includes Japan.
Las Vegas Sands President Rob Goldstein said the company has found the approach to building and creating “is much more effective than just buying and selling.”
Macau and Singapore
Las Vegas Sands is planning to spend more than $2 billion in Macau over the next two years, primarily on the renovation, expansion and rebranding of the its Sands Cotai Central complex into The Londoner Macau, a $1.35 billion London-themed resort first announced in 2017.
Marina Bay Sands in Singapore
In addition to creating The Londoner, the company is spending $400 million for the 370-suite St. Regis Tower Suites and $450 million for the 290-suite Four Seasons Tower Suites. Both are expected to be completed by the first quarter of 2020.
The Londoner project is being constructed in phases to create minimal disruption and is expected throughout 2020 and 2021.
Two weeks ago, Las Vegas Sands said it would spend $3.3 billion on the Marina Bay Sands resort in Singapore, which will include a 15,000-seat arena, a 1,000-room hotel, and additional convention space. Expansion to the resort’s casino – one of two in the island nation – is not part of the project.
“Over the past several quarters, we have commented on our capacity constraints at Marina Bay Sands and our willingness to invest additional capital for expansion,” Goldstein said. “We want to grow. Singapore’s evidence of that.”
Wall Street agrees
The investment community seemed satisfied by the answer.
Stifel gaming analyst Steve Wieczynski said the renovation and expansion efforts in Macau and Singapore follow with the company’s track record of designing and developing high return capital projects.
“Management continues to prudently allocate capital with the underlying objective of maximizing long-term shareholder value,” Wieczynski said. “We believe each of these investments will not only generate returns in excess of management’s targeted 20 percent hurdle rate, but that they will position the company well for the future.”
Union Gaming Group analyst John DeCree raised his target price on Las Vegas Sands to $80 per share based on the company’s first quarter results in Macau, where total net revenues increased 8 percent to $2.33 billion and net income was $557 million.
“The first quarter beat, highlighted by an acceleration in mass revenue in Macau coupled with green shoots in the Chinese economy, create a nice tailwind for Las Vegas Sands just as the year-over-year comparisons in Macau are set to get decidedly easier beginning in May,” DeCree told investors.
Goldstein and Dumont know Las Vegas Sands won’t be entirely able to avoid scrutiny as merger activity continues both in the U.S. and international markets. The company’s name surfaced as a possible buyer of Wynn Resorts’ Boston project if the property were to become available. Last week, the Cosmopolitan of Las Vegas was put on the market by the Blackstone Group, but Sands didn’t come up as a buyer.
“Our highest and best use of capital is having (Sands Chairman and CEO Sheldon Adelson) develop new high-growth properties,” Dumont said. “I don’t think you’ll see us do M&A in the near term.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
