Macau’s success moves Sands, Wynn

May 9, 2006 3:54 AM

Las Vegas Sands Corp. (LVS) has only one operating casino in the U.S. and one in Macau but the company dwarfs the other gaming companies when comparing the market capitalizations.

After a major runup in stock value during the past few weeks — especially after LVS reported a soaring first quarter profit last week — the company’s total worth exceeded $25 billion, at a price of $70.50 per share

Closest among its peers was Harrah’s Entertainment Inc. (HET) at $15.13 billion, followed by MGM MIRAGE Inc. (MGM) at $12.93 billion.

And Wynn Resorts Ltd. (WYNN) that also reported its quarterly financials last week, remained at a level just above the $7 billion mark.

But with both LVS and WYNN, the future was Macau.

Las Vegas Sands reported that its Macau gaming revenues rose nearly 63% to $278.2 million, easily topping the casino revenues reported by its Las Vegas operations at the Venetian Hotel/Casino Resort which rose 2.5% to $97.1 million. As for hotel revenues, the Venetian reported a 5% jump to $89.6 million with food and beverage revenue coming in at $35.3 million and the convention and retail revenue exceeding $34 million.

Net income for the first quarter rose to $121.9 million or $0.34 per share. In the comparable period of 2005, net income was $7.1 million or $0.02 per share. However, during that period, the company incurred a one-time charge of $132.8 million for the early retirement of debt.

But it was the future developments in Macau that appeared to get both analysts and investors excited.

"We are preparing for the opening this month of an expansion to our Sands’ Paiza Club, which will increase VIP gaming capacity, and we are on track for the completion and opening of the remainder of our Sands Macao expansion in August 2006," said Bill Weidner, president and COO.

"When the expansion is complete, The Sands Macao will have approximately 700 tables and 1,200 slot machines."

He added that construction of the Venetian Macao "remains on track for a summer 2007 opening."

Wynn Resorts

Macau was also on the minds of investors in Wynn Resorts Ltd. (WYNN) when Steve Wynn announced the company’s first quarter results.

Net revenues for the period that ended on March 31, rose to $277 million, helping the company to reduce its loss to $11.4 million or $0.12 per share. A year earlier, the loss was $29.9 million or $0.30 a share.

However, analysts were looking for the company to turn a profit in this third full quarter since the company began operating in April of 2005. The analysts had estimated revenue at $273 million and earnings of $0.10 a share.

Wynn said he was confident that "in time" the operators will eliminate the "extraneous" expenditures and continue to increase productivity.

Still, WYNN shares were battered in trading on the day following the announcements, but the prospects of Wynn opening his new venture in Macao in September helped restore some of the loss share value.

But on Monday, WYNN shares moved substantially higher, in the $75 range, following an upgrade from analysts at Bear Stearns.

Station Casinos

Despite a strong quarter that beat the comparable period of a year ago and even outdid the forecasts of analysts, Station Casinos Inc. (STN) saw its share price drop following the announcement.

Problem was, said the analysts, the guidance for the next few quarters was less than investors had hoped. As one analyst explained, "you don’t like to see guidance come down."

Station Casinos reported net income of $41.1 million or $0.62 per share versus a prior-year profit of $40.6 million or $0.59 per share. After removing pre-opening costs, an asset sale gain and other nonrecurring items, the company reported earnings of $0.78 per share up from $0.70 per share in the first quarter of 2005.

Company officials said the first quarter results were hurt by parking garage construction of several properties. "By the third quarter," said Lorenzo Fertitta, vice chairman and president, "we should start seeing the benefit of better parking."

As for the second quarter, the company said it expected per share earnings of $0.60 to $0.65 while revenues are expected to expand from 30% to 32%. And, for the remainder of the year, third quarter earnings would be between $0.53 and $0.59 per share and $0.66 and $0.71 per share.