The U.S.-based global leader in the resort business, Las Vegas Sands Corp. (LVS, Financial) does offer an array of high-end amenities to introduce an entirely new kind of travel destination. It has created the self-sustained world of entertainment in Las Vegas, Singapore, Macau and Bethlehem. It has a collection of integrated resorts in Asia & United States with premium accommodation, exhibition facilities, and world class gaming and entertainment facilities. There are two Five-Diamonds luxury resorts in United States on Las Vegas Strip: The Venetian and The Palazzo.
With very few major players in the resorts business, LVS has been the leader in the market with continuous growth in market price and higher market capitalization that makes it an attractive investment option for investors. While looking at factors that could help in deciding whether to buy or sell the stock, one major factor investors look at are future prospects. Apart from the present integrated resorts, the company has plans of investment in a Paris-themed integrated resort for which it has received an approval of the Macau government. In result, the total investment in Macau will be more than $10 billion, and the vast majority of that investment will be spent on building, convention and exhibition space and thousands of hotel rooms. Las Vegas is one of the most attractive cities in United States, and LVS is serving as the icing on the cake for tourists.
LVS in Hospitality Industry
MGM Resorts (MGM, Financial), Caesars Entertainment (CZR, Financial), Wynn Resorts (WYNN, Financial) and Penn National Gaming (PENN, Financial) are some of the players dealing in hotels and entertainment business. According to recent data provided by NYSE, the stock price of companies mentioned above are travelling southwards except for Wynn Resorts.
As per current market data on resorts and entertainment business, LVS and Wynn are attractive options to invest in. These growing companies have given higher profits to the business and are having bright future prospects. As far as investment is concerned, both the companies look attractive; however, quantum of investment has to be taken into account. The share price of Wynn is $148.60 which will lead to less shareholding while LVS can increase shareholding by buying more shares. Similarly, market capitalization is also more in LVS with more net income and sales than Wynn.
Las Vegas Sands enjoys the Edge
Fundamentals of LVS suggest that both long & short term investors can get benefits from investment in the company. The company returned $299.8 million of capital to shareholders through its stock repurchase program in the third quarter of 2014 which marked the completion of its initial $2.0 billion stock repurchase authorization. Secondly, quarterly dividend of $0.50 per share was paid which was an increase of 42.9%, when compared to the third quarter of 2013. These results do suggest that the company provides capital appreciation with regular dividend income, that, too, with growth in figures.
An economy where most of the population is middle class with the culture of saving is not an ideal market for hotel business. Thus, companies like LVS and Wynn have limited markets to deal in but since, people are interested in spending on gambling, the scope of earning for the company increases. With thousands of dollars floating on daily basis in LVS, the company has brighter prospects of giving returns to its investors. In developing economies such consumer spending could turn into an important source of income for both the company and its investors.
Online gambling business is another issue that is creating competition for the existing companies. U.S. economy has opened the market for online gambling while Singapore has not allowed it yet. However, it is noted that people have taken LVS as an experience rather just taking it as just another casino, and its philosophy of giving personal attention to customers to give a feel-at-home experience attracts them to visit LVS at least once in their lifetimes. Thus, online gambling does not pose much of a threat for LVS. In addition, it does not deal only in casinos; it has many other amenities that could attract a wide range of customers. Diversified services and different types of target audience helps the company in improving its appeal to a wide variety of customer bands.
Final thought
Las Vegas Sands is the undoubted global leader in integrated resorts. Hospitality is the industry where quality is more important than quantity; thus, revenue may not give a clear picture about the future of the business, and rather it is the customers’ satisfaction that helps in determining future growth. LVS has currently a huge number of customers who come for buying LVS services that reflects the level of customers’ satisfaction.
With few competitors, LVS has better prospects for investors to gain from investment in its stock. Since market capitalization reflects true comparison of the value attributed by the stock market to a given stock, LVS looks more attractive than its immediate competitors. The proposed projects of LVS in other countries might play a role to increase the return to shareholder’s equity and positive signal by the Macau government to complete the construction of a Paris-themed integrated resort further makes the LVS stock attractive from the investment perspective. Presently, LVS is operating in a country that has the inherent consumer culture of spending and the business line of resorts, casinos and entertainment requires such market penetration. Thus, LVS does have a bright scope for growth that can in turn lead to an increase in its shareholders’ value.
