Las Vegas Sands COO Rob Goldstein has proven to be a very articulate spokesman for his company and cheerleader for its prospects.
Perhaps nowhere were those qualities on better display than in the company’s first quarter investor conference call, which kicked off the earnings season for the gaming industry.
It helped that LVS beat consensus expectations and earned 91 cents a share versus the estimated 86 cents. And it didn’t hurt that this was the company’s first such call since announcing a $3.3 billion expansion coming to Marina Bay Sands in Singapore.
Among Goldstein’s rhetorical gems:
• He is “very excited…thrilled” about the Singapore expansion. “If we do it right, we are going to shock people.”
• On the “extraordinary power of premium-mass” the upscale tourist-gambler being targeted by LVS in Macau: “Gambling is critical in Macau, but we are selling a lifestyle, and it (premium-mass) is only going to grow.”
• On the company’s growth potential in Macau, where it has far more hotel rooms at 13,000 than any competitor and is adding 1,000 more: “Macau needs more rooms. I just wish we had 5,000 or 10,000 rooms. We could use them.”
• On efforts to win one of Japan’s three casino licenses: LVS “is looking at decades to invest many billions of dollars… Our commitment will be immense… There will be many, many hotel rooms… We’re fully committed to being in Osaka.”
What is noteworthy about Goldstein’s enthusiasm is that it appears warranted.
Marina Bay Sands has been an extraordinary success. The single property generated $1.690 billion in EBITDA last year. If the expansion produces the targeted 20 percent return that would result in $2.350 billion. That is more than Wynn, Caesars and Penn National did last year for their entire companies, and nearly matches MGM Resorts $2.5 billion. And 2018 was an off-year for Marina Bay Sands in part thanks to low VIP hold.
Singapore, Goldstein said, is capacity constrained.
LVS is spending $2.150 billion in Macau renovations and expansions. Again, the same simple math suggests another $430 billion when those projects are complete.
Last year, LVS generated $5.3 billion in adjusted property EBITDA. Analysts forecast $5.5 billion in the next year or two. Singapore won’t come online until 2023. Then there are the other growth projects, such as The Sphere concert arena in Las Vegas. So EBITDA of $6.5 billion seems to be in the foreseeable future.
Of course, size isn’t an end in itself. Profit growth at a reasonable price is what investors seek. And that is where the assessment of LVS diverges with some analysts saying the stock at 12 or 13 times this year’s forecasted EBITDA is good but not compelling, and others looking at the growth prospects and saying “Oh yes it is.”
If LVS does get well north of $6 billion in EBITDA five years from now, long-term investors will be rewarded by a stock that, if rising commensurately, would generate growth in the upper teens each year.
That doesn’t count the growing dividend now yielding 4.6 percent, which adds four to five points onto the growth rate for total return. Nor does it count the impact of a shrinking share base as repurchases have brought the number of outstanding shares down to 775 million from more than 800 million a few years ago.
Or, in the words of Sheldon Adelson that Goldstein read at the start of the call to add the CEO’s own rhetorical flourish: “Yea buybacks. Yea dividends.”
