• Las Vegas Sands has benefited from its substantial market-share in Macau
  • Company faces fallout from crackdown in Macau and stiffer regulatory environment
  • Dividend payouts are still growing and remain intact despite downturn in share prices
  • Las Vegas Sands (LVS) has seen a sharp downturn in its trajectory over the past year. The casino and hospitality company, which has a large portion of its revenue fortunes tied in the Macao industry, has been largely affected by the gaming haven’s financial troubles and recent laws and regulations by the mainland Chinese government. LVS’ problems in the region have been compounded by the financial uncertainty in China, and overall contraction in the Macanese gaming industry. However, the company has stayed relatively stable in terms of dividend payouts, increasing them by 10% consistently in the previous year.  Although there might be some questions as to their ability to maintain this payout rate, the company has the potential to be the strongest competitor in a weak field.

    The Fundamental Perspective

    LVS has seen its revenues decline consistently over the previous four quarters, with the most recent quarter’s revenues coming in -19.4% lower year over year. In the second quarter of 2015, the company underperformed relative to the S&P 500 (SPY) benchmark and the hotels, restaurants, and leisure industry on average, with the company’s net income slumping by -30.1% year over year. These trends have been manifested throughout the company’s financials, with earnings per share also dropping 40% to $0.59 year over year.

    These negative financial trends can be mostly attributed to external factors, but nevertheless situations that are not expected to change in the near future. Macao, a long-time favorite gambling hub of high ranking Chinese political elite, has recently been hit by a crackdown on corruption by the Chinese Government. Overall, this has caused a sharp drop in the amount of VIP visitors to the region. For LVS, this restriction has been a blow to their gaming turnover. From 2014 until 2016, the company is projected to lose almost 42% of this revenue. Macao’s crackdown means that VIP customers are more hesitant to visit casinos there, and if they do, are more cautious when it comes to spending large amounts of money.

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