Las Vegas Sands’ revenue potential boggling

Imagine a single casino company collecting nearly $11 billion in annual revenues by the end of next year.

And that includes accounting for a possible slowdown in one of its major gaming markets.

Janney Montgomery Scott gaming analyst Brian McGill downgraded shares of Las Vegas Sands Corp. from "buy" to "neutral" earlier this month. He told investors that revenues from the Marina Bay Sands in Singapore could be slightly lower in the fourth quarter compared with the company's previous two reporting periods.

He is also concerned that Macau's December numbers could be a tad below what many expect the market to produce, which could cut into results from Las Vegas Sands' three casinos in the Chinese special administrative region.

These are just short-term worries.

When 2012 is in the books, McGill expects Las Vegas Sands to be reporting revenues of more than $10.9 billion.

Let's put this figure into perspective.

In 2010, Nevada's entire casino industry collected $10.4 billion in gaming revenues. Through October, gaming revenues are up in the Silver State by 2.5 percent. Las Vegas Sands, in 2010, had revenues of $6.85 billion. McGill estimates the company will report $9.2 billion in revenues for 2011.

What he might construe as a slightly-off quarter for Las Vegas Sands would be considered a monster year for some casino operators.

In the spring, the company will start opening 6,000 hotel rooms as part of its Cotai Central resort complex in Macau, which will include hotels operating under the Sheraton, Holiday Inn and Conrad brands but centered around the casinos operated by Las Vegas Sands. The project is expected to give the company an even larger cut of Macau's now-$30 billion-a-year gaming market.

"Las Vegas Sands should also benefit from taking share in VIP gaming at existing properties in Macau, as it looks to add junkets and refurbish VIP rooms, which should be more appealing to players," McGill told investors.

It's possible the $3.88 billion he is projecting for Las Vegas Sands' overall cash flow in 2012 could be even larger.

"(It's) something we will monitor," he said.

The key driver for Las Vegas Sands is Singapore.

The island-nation approved just two casinos as part of a general plan to increase tourism.

Gaming is supposed to be a small portion of the entire integrated resort.

As such, the largest part of Resorts World Sentosa is a Universal Studios theme park. The Marina Bay Sands has a relatively average-sized 165,000-square-foot casino, along with more than 1 million square-feet of retail and 1.2 million square-feet of convention and meeting space.

Singapore's tourism figures grew by 20 percent in 2010 but no one anticipated the gaming element.

In a research report this month, Citigroup said the combined gaming revenues from Resorts World Sentosa and Marina Bay Sands could top $6.9 billion next year, easily surpassing the Strip, which had $5.8 billion in gaming revenues in 2010.

The Singapore government has tried to slow gaming, ordering casinos to charge entrance fees for local residents and to limit promotions. Singapore is capped at two casinos until 2017.

McGill thought Las Vegas Sands' total revenues from Singapore would top $3.3 billion in 2012, an astonishing figure that would be more than double what he expects the company to collect from The Venetian and Palazzo on the Strip.

Additional growth in Asia is not off Las Vegas Sands' radar.

Company Chairman Sheldon Adelson recently visited Japan and Vietnam for potential gaming opportunities. Japan, which saw its economy ravaged by an earthquake and tsunami earlier this year, is reconsidering its ban on gaming as it looks for ways to boost tourism.

A Japanese economics professor predicted Japan could become a $44 billion-a-year gaming market.

McGill said Las Vegas Sands, based on its track record, is considered a favorite in any emerging gaming market, including Japan. Las Vegas Sands is one of several operators taking a hard look at the potential for casinos in South Florida.

The company is also looking at replicating its Cotai Strip development in Spain.

"These all represent potential value to the company, but right now we find it difficult to handicap the odds enough to assign a value to the stock," McGill said. "Many of these potential markets have been talked about for a long time and have never come to fruition."

Howard Stutz's Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. He blogs at lvrj.com/blogs/stutz. Follow @howardstutz on Twitter.