The Cards Could Be Stacked Against the Las Vegas Sands
The Las Vegas Sands is the largest casino entertainment corporation in the world. While it is based in the casino gambling capital of the world, its business interests span the globe. The company has been under the spotlight lately with poor financial results in certain sectors. According to a recent report by The Motley Fool, this could be just the tip of the iceberg. Highlights of that report were posted on Yahoo Finance the other day.
Over the past three months, Las Vegas Sands’ stock price as lost close to 20 percent of its value. The main concern among investors is slowing growth in Asia. Other factors are escalating trade wars, loss of value in the yuan and civil unrest in Hong Kong.
Does The Las Vegas Sands Corporation Need Help?
Investors are still drawn in with a low price verse earnings (P/E) of 16. There is also an attractive six percent yield on the company’s dividend. However, further financial analysis still raises cause for concern.
The report cites slowed growth in the company’s Macau casino properties. Las Vegas Sands derives 61 percent of its adjusted EBITDA from its five properties and ferry operations in that region.
After enjoying eight months of double-digit growth in 2018, the casino giant is dealing with stalled growth this year. Over the last seven months, four have resulted in negative revenue against the same time frame last year. The best month was June with a 5.9 percent increase. This was followed by a 3.5 percent decline in July. The source for these figures comes from Macao Gaming Inspection and Coordination Bureau.
The general economic slowdown in China is a driving force along with increased trade war concerns. You can add in lower spending from casino VIP’s, reduced junkets and travel disruptions.
This region has been the company’s primary growth engine the past several years. It can ramp up its competitive efforts to increase the overall share of a stagnate market. However, those actions always come at a price that could impact bottom-line profit.
It just so happens that company CEO Sheldon Adelson is one of Donald Trump’s biggest political donors. This could also factor into the escalating trade war with China. The government could use Sands’ Macau properties as leverage against Trump in a retaliatory measure.
The good news is that Las Vegas is heating up again after its own financial woes. Sands’ EBITDA in its own backyard soared to $136 million in the last quarter. The downside is that its Las Vegas business only accounts for 12 percent of its adjusted property EBITDA. These gains are still not enough to offset losses in other regions such as Macau and Singapore.
Revenue From It’s Casinos In Las Vegas
Conversely, MGM Resorts derives most of its company revenue from its casinos in Las Vegas. This has resulted in a 10 percent gain in the stock price over the past three months.
The current unrest in Asian markets is likely to keep the downward pressure on Sands’ stock price in the short term. Moreover, this makes the company a bad bet for anyone looking cash in on the casino gambling industry.