Let's take a look at the strengths, weaknesses, opportunities, and threats of Las Vegas Sands , what is commonly known to Motley Foolers as a SWOT.
- Management-Sheldon Adelson, who with his family owns 52% of common shares, has steered his company beautifully. First buying the Sands casino hotel in Las Vegas, tearing it down when it became clear that it was uncompetitive with the other resorts, he erected the Venetian in its place. The casino did well until the financial crisis, when, to keep his company from going out of business, Adelson personally loaned the corporation a billion dollars to keep it afloat. That has paid off for shareholders handsomely since.
- More kudos to management- when people doubted that it was worthwhile to expand to Singapore, Adelson kept firmly to his guns, stating that it would be profitable to do so because there was not much competition in the region. He was proven correct.
- Adelson has the company incredibly well positioned in Asia, which is the fastest growing gambling market in the world. Sands has four hotel casinos in Macao (three of which are on Cotai, which is an area of reclaimed swampland designated for all future casino expansion.) Additionally, its Singapore Marina Bay hotel has set all sorts of records for gambling revenues, and destroyed even the most optimistic expectations.
- Las Vegas Sands, unlike MGM , Caesars , and Wynn Resorts has eschewed the possibility of entering into the online gambling market. Adelson is actively campaigning against the legalization of online poker in the United States because he believes Internet gaming to be morally wrong, which I find rather hypocritical considering the at best nebulous morality of the casino industry to begin with.
- A price to earnings ratio of over 25 implies a tremendous amount of future growth. The stock has declined almost 15% in the last year, and doesn't seem cheap, even now.
- Like most casino companies, the balance sheet is laden with debt. (Though nowhere near what MGM has)
- EuroVegas in Madrid- estimated to take 10 years to build, it will contain twelve hotels, six casinos, golf courses, bars and restaurants, and a convention center. Europe has many small casinos dotting its landscape, but aside from Monte Carlo, very few major resorts.
- Possible expansion to Florida.
- Looking to expand to countries such as Japan, Korea, Taiwan, Vietnam, and Thailand. The Japanese specifically are looking to do casino gaming in a similar manner to Sands Marina Bay, trying to infuse their economy with foreign gambling money (Sands Marina Bay charges 100 Singapore dollars per day for Singaporeans to enter the casino in an effort to keep local gamblers away, as the government is trying to fill its coffers with foreign money rather than inefficiently taxing locals).
- If housing prices in the United States fall, as the banks liquidate foreclosures that they have intentionally kept off the market, consumers/ desire to spend on gambling would naturally decline.
- The Chinese government decides to play hardball with Macao and legalizes gaming in other localities of China. Though very unlikely, doing business in China can be, to put it euphemistically, "an adventure."
- A worldwide economic slowdown will act as a cooler for gambling profits worldwide. As mentioned above, in the United States consumption of gambling is likely the first item consumers will cut from their budgets.
- If new gambling facilities don't do as well as expected, shares would likely get hammered, reducing the price to earnings ratio to more reasonable levels.
Although I believe the company to be extremely well managed, for me it is a tad too expensive to invest in at this point. You might be better off going with a dividend casino play in the form of Wynn Resorts. Although online poker might not add directly to revenues anywhere close to what one of their land based casinos brings them each quarter in profits, the fact is that they will miss out on some of the synergies of bringing people online to their land based casinos (and vice-versa), which its competitors will have. If you want me to pay 25x earnings, I want you firing on all cylinders and not leaving money on the table.
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