Mr Adelson’s Few Options for Sands

Posted: August 2, 2009 in Uncategorized

This is the latest news extracts from Las Vegas:  KING SPADE

Las Vegas Sands Corp (NYSE:LVS) shares lost 16% yesterday with shares now in the $9 range after reporting dissapointing Q2 09 results and Moody’s Investors Service placed the  ratings on review for possible downgrade following the Q2 loss.

The Sands lost $222.2 million in Q2 2009, compared with a loss of $8.8 million a year ago. Results in the most recent period were hurt by charges to settle a legal matter and other charges for weaker-than-expected proceeds from the sale of a mall at one of its resorts in Las Vegas.  Revenue also declined around 5% amid weak consumer spending.

Revenue at Sands’ Vegas properties fell 17% while EBITDAR (a measure of cash flow) dropped 27%.

Venetian Macau EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) slipped 22%, while Sands Macau actually saw EBITDAR climb 13%. Both properties also slumped on the revenue line.

 

Expert IRExpert IR’s View:

If EBITDA were to drop so much, as to >20% on average, Sands’ overall operating margins would have been worse.

Few options are left for Adelson:

–         Look for private equity funds to buy over up to 30% of Sands stakes in order to provide the required continued funding for Sands. Bearing in mind the weaken share prices.

–         Strategically decides whether to open Marina Bay Sands at all!!!   Once it is opened and fails to bring in the expected EBITDA, it amounts to declaring a Dead Sentence for Sands. So, keep delaying the opening may be a better strategy to wait out the crisis and creates false hope for the time being for investors/creditors.

–         Macau government takes on a stake in the Cotai Strip development. After all the government’s 80%+ tax revenue comes from contribution by gaming industry. That will produce great confidence for all casino operators in Macau. Creditors and investors alike will come in and back up whatever capital-debt restructuring badly needed by Sands and the rest.

–         Yes, I forgot about the Hong Kong IPO (using Sands’ Macau low value assets)…

 

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