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The Sands Macao, one of tw o giant casinos in the Chinese gambling

haven operated by Las Vegas Sands.

Imaginechina View Enlarged Image

BUSINESS

Las Vegas Sands Bets On China Expansion

By MARILYN MUCH, INVESTOR’S BUSINESS DAILY

Posted 08/22/2011 02:25 PM ET

The crew at Las Vegas Sands (LVS) has figured out a way to pull in big

winnings in the high-stakes gam bling business: Just follow the

m oney.

For the Las Vegas-based casino operator, that trail has led to Asia,

where it has properties in Macau, the world’s largest gam bling m arket,

and Singapore.

Macau, a form er Portuguese colony, is the only place in China where

casino gam bling is legal. It’s an hour ferry ride from Hong Kong and a

hot spot for the growing num ber of people in China who now have

enough discretionary incom e to gam ble.

Business has been boom ing in the gam bling haven. Macau’s second-

quarter gam ing revenue surged 46% vs. the prior year, according to

the Macau Gam ing Inspection and Coordination Bureau. The trend

has continued, with a 48% rise in July.

Las Vegas Sands has been cashing in on the good fortune in Macau, where it owns properties through its 70.3%-owned Sands China

Ltd. subsidiary. Business in the region has helped the global resort developer’s revenue grow at double-digit rates for seven straight

quarters.

In the m ost recent second quarter, Sands China’s revenue popped 16.3% from last year to $1.21 billion. It accounted for 51% of Las

Vegas Sands’ total sales, which grew 47% to $2.35 billion.

Two Casinos

The com pany has built a strong presence in the region with the Sands Macao, the region’s first Las Vegas-style casino, and the grand

Venetian Macao resort that sits on a piece of reclaim ed land called the Cotai Strip.

Now Las Vegas Sands Chief Executive Sheldon Adelson is upping Las Vegas Sands’ presence in Macau even m ore. On Aug. 5, Sands

China announced it has signed franchise agreem ents with Hilton Worldwide and InterContinental Hotels Group (IHG) to open properties

at Sands’ newest Cotai Strip developm ent starting early next year.

Called Sands Cotai Central, Sands’ casino resort will feature a com bination of 6,000 room s and suites from Hilton’s Conrad, Sheraton,

Sheraton Towers brands and InterContinental’s Holiday Inn.

It will also have expansive m eeting and convention space, two casinos, and a wide array of luxury retail outlets, entertainm ent and dining

options. And it will be close to the Venetian.

The Conrad Macao is set to open in the 2012 first quarter and the Holiday Inn Macao is also planned to open late in next year’s first

quarter.

Sands has suffered m any delays in opening its new developm ent. Once it opens, it holds a lot of potential, say som e analysts.

“It will give them a dom inant position in Cotai and a fairly dom inant position in Macau overall,”

said Christopher Jones, Telsey Advisory Group’s gam ing and lodging analyst.

Jones says Cotai Central will be the only new gam ing property developm ent to open in Macau

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between 2015 and 2016. As the region’s newest property, he adds, it should help drive visitor

and custom er interest.

That’s the hope of Sands’ m anagem ent.

“When com bined with our existing properties, Cotai Central will provide the critical m ass I’ve

always said is necessary to persuade a larger and broader set of m eeting and convention

organizers into holding their events in Macau,” Adelson said in a statem ent.

The openings will be gradual. A Sheraton hotel is on track to open on the new property in the

2012 third quarter, said Las Vegas Sands President Michael Leven on the second-quarter

conference call. A Sheraton Towers is set to open in early 2013.

Meanwhile, the com pany’s Marina Bay Sands resort, convention and entertainm ent and gam ing

com plex in Singapore is also in the chips. It partially opened in April 2010 with portions added

throughout the year.

A strong perform ance from Marina Bay helped propel solid gains and an upside surprise in the second quarter, say followers. Las Vegas

Sands’ earnings soared 218% to 54 cents a share, topping views by 10 cents.

KeyBanc analyst Dennis Forst notes the com pany had a “terrific quarter” in China, which was expected.

“What was surprising was how strong Singapore was both in revenue and m argin,” he said.

Marina Bay posted $737.6 m illion in net revenue for the quarter, or nearly one-third of the com pany’s total sales for the period.

The com plex’s adjusted property EBITDA m argin, a key m easure of operating perform ance, was a hefty 55%.

Adjusted property EBITDA is net incom e before stock-based com pensation expense, corporate expense, rental expense, preopening

expense, developm ent expense, depreciation and am ortization, loss on disposal of assets, interest, other incom e, gain on early

retirem ent of debt and incom e taxes.

Jones says Marina Bay’s perform ance in the second quarter shows that the com pany has learned how to operate in Singapore.

“The property continues to ram p and should benefit from retail, entertainm ent and infrastructure additions over the next 12 to 24 m onths,”

writes Jones in a report.

Am ong the additions is a Louis Vuitton store, set to open at the com plex next m onth, and two nightclubs. The Marina Sands is scheduled

to have its own subway station in 2012.

U.S. Properties

The Venetian and the Palazzo luxury resorts on the Las Vegas strip are am ong the com pany’s properties in the U.S. It also owns the

Sands Bethlehem in Bethlehem , Pa.

During the quarter, the com pany’s Las Vegas properties posted adjusted property EBITDA of $93 m illion, up 41% from the prior year.

“Stronger cash hotel revenue from convention and group custom ers reflect the im proving Las Vegas environm ent,” said Adelson on the

second-quarter conference call.

Standard & Poor’s Esther Kwon says Las Vegas Sands has benefited from a return of corporate convention business in its hom e base,

which typically is m ore profitable than the leisure travel business. It’s also “backed off” from offering prom otions, such as free room s and

food to custom ers whose nam es are in its database, she says.

Followers expect the com pany’s winning streak to last. Analysts polled by Thom son Reuters see 2011 earnings rising 93% to $1.89 a

share. They forecast a 28% rise in 2012.

Forst says Singapore has a lot of growth potential, and he expects its business in Macau will continue to grow and pick up share with the

opening of Cotai Central next year.