Members of our Inner Circle service often ask for our advice on stocks they are thinking of buying that we don’t cover in our newsletters. These companies range from the most speculative penny mines to large multinational growth stock picks.
For example, an Inner Circle member recently asked for our advice on hotel and casino operator Las Vegas Sands Corp. The growth stock pick’s shares have risen sharply over the past year, and it is opening new resorts in Asia and the U.S.
To give you a sense of how my Inner Circle service works, I’d like to share this question, and our answer, with you. I hope you enjoy and profit from it.
Q: Pat: Las Vegas Sands is on the Vegas strip, plus it also has branches in China. What do you think of this stock?
A: Las Vegas Sands Corp., $48.03, symbol LVS on New York (Shares outstanding: 660.7 million; Market cap: $31.7 billion, www.lasvegassands.com), is one of the world’s largest hotel and casino operators.
The company gets about 80% of its revenue and earnings from Asia, and 20% from the U.S.
In Macao, China, the company owns 70.3% of Sands China Ltd. This subsidiary owns the Venetian Macao Resort Hotel, the Four Seasons Hotel Macao and the Sands Macao Casino.
New U.S. and overseas resorts brighten this growth stock pick’s prospects
In Las Vegas, Nevada, the company owns the Venetian Resort Hotel Casino, the Palazzo Resort Hotel Casino and the Sands Exposition and Convention Centre.
In April 2010, Las Vegas Sands opened the first phase of its Marina Bay Sands casino resort in Singapore. The final two phases will open soon. In all, this project will cost about $6.4 billion. Singapore has a well-educated population and is a major banking centre for the region, so this investment has strong potential.
Las Vegas Sands is also developing a hotel/casino/retail complex in Bethlehem, Pennsylvania. It owns 86% of the hotel and casino portions, and 36% of the retail operations. The company opened the casino portion of this project in May 2009. It plans to open the hotel in the second quarter of 2011. Because of the weak economy, the company has suspended work on the retail portion.
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Big jump in revenue and earnings
In the three months ended September 30, 2010, Las Vegas Sands earned $265.2 million, or $0.34 a share. That’s a big jump from the $20.1 million, or $0.03 a share, it earned a year earlier. These figures exclude unusual items, mainly construction costs related to the company’s new casinos in Singapore and Pennsylvania. Revenue rose 67.3%, to $1.9 billion from $1.1 billion.
Most of the gains came from the recently opened first phase of the Singapore casino. Revenue at the company’s hotels and casinos in Macao rose 27.2%. Thanks to a plan to boost operating efficiency, the Macao operations’ earnings jumped 43.3%.
Revenue at the U.S. operations rose 27.9%, and earnings jumped 74.5%. The improved U.S. results mostly reflect the 2009 opening of the new casino in Pennsylvania, and the introduction of table games at this casino in July 2010.
The growth stock pick’s heavy spending on new casinos has pushed up its long-term debt to $9.6 billion. However, that’s still a manageable 30.3% of its market cap. As well, the company holds cash of $2.6 billion, or $3.93 a share.
A strengthening U.S. economy would improve the company’s profits in the competitive Las Vegas market. Meanwhile, Las Vegas Sands plans to build more hotels and conference centres in Macao. It also wants to expand to Japan when that country legalizes casino gambling. That could add significant opportunity, but also presents a number of risks.
Our buy/sell/hold advice on Las Vegas Sands, based on the company’s expansion plans and its current prospects, is only available to members of our Inner Circle. You can’t get it anywhere else! (Note: If you are a current Inner Circle member please click here to view Pat’s recommendation. Be sure to log in first.)
If you’re looking for authoritative advice on investment issues, or fundamental analysis of stocks you’re considering buying (or selling), you should join my Inner Circle. It’s Canada’s most exclusive investment group.
Inner Circle members always get clear, concise investment advice that’s 100% independent, and untainted by commissions or other undisclosed influences. I guarantee it. Click here to learn more.
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