Las Vegas Sands CEO Sheldon Adelson and COO Rob Goldstein pounded the table on the outlook for Macau in their first-quarter investor conference call on April 22. And investors responded, immediately boosting the stock 10 percent.
Adelson also cheered investors by saying the company will resume its dividend when profitability returns. And it might be a healthy payout. Responding to a question, Adelson pointedly said that the quarterly dividend, which was 79 cents a share, was suspended, not ended. That suggests he’d like to see the dividend at its previous level.
But perhaps the most important thing Adelson said on the call is that Las Vegas Sands is on the acquisition hunt.
That is potentially a very important change.
Acquisitions can give LVS the opportunity to use its financial strength at a time when others are financially weaker, entering new markets that have a limited number of casino licenses.
Though Adelson said he doesn’t have any particular market in mind, he then rhapsodized about Asia, making it clear the Far East will be his hunting ground.
That Las Vegas Sands might use acquisitions to enter markets is appealing on the surface. LVS doesn’t have to be limited to a buy-or-build choice. It can buy and build.
For example, one can envision a scenario in which LVS buys a casino resort in Entertainment City in Manila, from a financially weakened owner, and then expand the property into the quintessential Las Vegas Sands integrated resort.
Vietnam is opening to large-scale casino development, and likewise, South Korea has smaller operators who might enjoy profiting as minority owners in something like a Sands Korea. It’s worth noting that, on the investor presentation posted on its website, LVS lists South Korea among “principal areas of future development.”
Adelson also made the point that LVS is currently serving only a small portion of Asia’s population. A casino in South Korea could tap into the huge northern China population that’s almost untouched by Macau operators.
M&A for the Little Guys
It isn’t just giants like Las Vegas Sands or soon-to-be-giants like Eldorado that can play the acquisition game.
Indeed, the shutting down of casinos in the effort to contain Covid-19 might put smaller operators in vulnerable positions, if not straight out of business, as Lakeside Casino in Lake Tahoe just announced.
How long can independent owners, or owners of small chains of casinos, hold out with business frozen? Some of them doubtlessly can’t.
Already, employee-owned Casino Queen in East St. Louis, Illinois, has reportedly missed a rent payment to landlord Gaming & Leisure Properties. A casino-hotel that’s a five-minute drive from downtown St. Louis and the Gateway Arch might be attractive.
So, there may be plenty of opportunities for buyers as Covid-19 knocks down asking prices.
Of course, the industry will need to reopen and business conditions approach normal before companies can borrow to finance acquisitions.
When that day comes, it wouldn’t be surprising to see Maverick Gaming continue its buying spree. Century Casinos has shown it can buy small properties. Churchill Downs, too. And Monarch Casino will have the balance sheet strength to acquire.
