Second quarter earnings report season has begun and so far so good.
Of course, the two (U.S.) companies to report to date—Las Vegas Sands (LVS) and Monarch Casino—are more unique than representative, but there are positive messages for the broader casino industry, nonetheless.
Basically, both companies reported strong business trends. And on their investor conference call, LVS executives were especially bullish about their operations in Macau and Singapore.
Monarch has just two casinos in two somewhat isolated regional markets—Reno and Black Hawk, Colorado. Nonetheless, that business is strong suggests the same may hold true for operators in those and other regional markets.
What is especially noteworthy for Monarch is that it is piling up cash and will soon be debt free. By most measures and projections, Monarch is fairly priced in the $70s per share. One can speculate about whether the company will find an acquisition or be open to being sold. But CEO John Farahi is a tough customer when it comes to value and it is difficult to see the right prices aligning in either direction for the family-controlled company.
What is certain is that Farahi will only move if he has a solid deal for shareholders. That, and the growing mountain of cash likely to translate into increasing dividends to stock owners, suggests Monarch’s stock is worth a premium price.
If he does find an acquisition or what he sees as an acceptable offer to buy Monarch, then, as the old saying goes, you can bank on it.
LVS CEO Rob Goldstein was about as bullish as he has ever been on his conference call citing property expansions in Singapore and Macau and the accelerating recoveries in those markets.
The growing visitation and customer spending seen in Macau clearly are positives for all Macau casino operators though LVS, with its approximately 12,000 hotel rooms and full range of amenities, is positioned to benefit no matter what direction the recovery takes, Goldstein noted.
As a Macau skeptic, I’ll admit that Goldstein and his fellow executives presented a powerful case for the market and for the company. LVS will soon be back as a $5 billion EBITDA generator, a powerful amount of resources to deploy.
From an investor policy perspective, the big news is that LVS is resuming its dividend and, while modest at 80 cents a share, will combine it with what was termed a programmatic approach to share repurchases with the intention of reducing share count.
In a way it is appropriate that Monarch and LVS lead off the earnings parade. Both are dedicated to quality and their financial results show it; and both are returning growing profits to shareholders in a formula for successful investing.
AND THE WINNER IS…
Here’s a message to public companies everywhere: If you want your quarterly conference calls to be highly effective, follow the Las Vegas Sands model.
There are two aspects to LVS’ success: 1) A detailed written presentation posted online and 2) skipping an oral summary of the quarter and going straight to Q&A.
The written presentation combines both neutral information and the company’s projections and strategies. An example is the table that shows visitation to Macau over time from various provinces in China. A reader can immediately mine it for valuable inferences that beat the repetitious stories, reports and analyses about Macau visitation that bombard investors every day. It’s worth visiting the investor section of the LVS website to see how they do it.
More important is the call itself. Goldstein simply made a tone-setting statement and threw the call open to questions.
Nothing is a greater waste of everyone’s valuable time than calls in which the CEO and CFO drone through long-winded recitations of what is already in the earnings news release and posted on the website.
Answers to investor questions are the most valuable part of any call. Get straight to it.
