Inside Asian Gaming

INSIDE ASIAN GAMING | April 2009 16 When Sheldon Adelson stated recently that the stock price of his casino operating company Las Vegas Sands Corp (LVS) would one day trade at US$100 per share, it’s possible to argue he wasn’t seeking cheap headlines. He was talking to the markets and to investors, and he had several messages rolled into one. The first was: ‘I’m still here despite the recent board room divisions and as hungry as ever for success and with undimmedpersonalenergy’.Thesecondwas: ‘There’s nothing wrong with our business model. We were hit by a perfect storm of once-in-a-lifetime economic conditions’. While both messages are statements of opinion and will have their veracity tested by events, the markets do appear slowly to be regaining faith in LVS. There is, however, a long way to go to get back to the heights of 2007. LVS went public in a 2004 offering at US$29 a share. By October 2007, its shares had risen to US$140. In the first full week of April this year the shares were trading at US$4.03 each on the New York Stock Exchange. But as a number of macroeconomics commentators have mentioned recently, all markets remain vulnerable to sudden nervousness on the part of investors. It’s perfectly possible for LVS to regain its position as an outstanding performer in its sector, given its positioning in Macau and the numbers of passionate gamblers in China. In order for the stock of LVS and other casino operators with Asian operations to be protected from sudden shocks linked to investor volatility, though, markets generally will need to regain ‘traction’—i.e., solid and sustainable growth. Business structure On the issue of the strength of LVS’s business model, there can be little doubt that following the debt default risk drama of last November, investors will in future be asking harder questions of Mr Adelson and his company. Prior to the global credit crisis and the massive discounting of its stock that began in Q4 2008, the markets certainly displayed great faith in the company. Few analysts raised serious objections when in late 2007 a number of investment bankers were bandying around figures of US$17 billion being raised by monetisation of LVS’s real estate such as shopping malls and apartments, as if it were already money in the bank. Mr Adelson, the company’s founder, chairman and chief executive, is an excellent salesman for his organisation. He recently went into overdrive with a number of public announcements. The most prominent—delivered in early April by Stephen Weaver, a man described in LVS earnings call transcripts as ‘President of Asia’ (possibly a little premature even for a company of LVS’s regional stature) —was that LVS planned to resume construction of its stalled Macau projects by year-end. Work on LVS’s Cotai site was suspended last November following the default risk announcement and warning about LVS as a going concern made in a statement by the company’s auditors to the US Securities and Exchange Commission. China talks The news about restarting construction on Cotai followed another statement by Mr Adelson late lastmonth. Mr Adelson revealed he and Michael A. Leven, Bill Weidner’s replacement as President and Chief Operating Officer at LVS, had travelled to China to meet with four groups enthusiastic about buying into the company. He said they included two construction companies interested in financing and building the two suspended hotel projects on the Cotai Strip in Macau in exchange for equity. “They’re serious people with serious intent and deep enough pockets,” stated Mr Adelson, although he cautioned it was too soon to announce any firm news. Since that statement, though, it’s been revealed in SEC filings that in the last three trading days of March Mr Adelson bought an additional 12.6 million company shares for US$37.4million. Given the timingof the share purchase, analysts say it’s unlikely that a deal with one or more of the unnamed investors is imminent. For a chairman to buy his company’s shares when he has knowledge Feature Back to the Future LVS thinks it may be on track again in Macau Sheldon Adelson