\nThere is a reason analysts spent about 40 minutes questioning Las Vegas Sands Corp. officials last week about the company\u2019s over-the-top results in Macau.<\/p>\n
\tIt has to do with Confucius.<\/p>\n
\tDuring a conference call to discuss Las Vegas Sands\u2019 first-quarter earnings \u2014 net income of $776.2 million on a single-quarter record of $4.01 billion in revenue \u2014 analysts didn\u2019t ask a single question about the company\u2019s Strip resorts, The Venetian and the Palazzo.<\/p>\n
\tThey weren\u2019t even curious about Las Vegas Sands Chairman Sheldon Adelson\u2019s widely publicized war on Internet gaming.<\/p>\n
\tMacau was all they cared about.<\/p>\n
\tNo wonder. More than half of Las Vegas Sands\u2019 quarterly revenue \u2014 $2.02 billion \u2014 came from its Macau resorts.<\/p>\n
\tUnion Gaming Group principal Grant Govertsen, who is based in Macau, expects Las Vegas Sands \u201cto outgrow its peers over the near, medium and longer terms.\u201d<\/p>\n
\tMacquarie Securities gaming analyst Chad Beynon said Las Vegas Sands is the gaming industry\u2019s \u201cbest Asian gaming growth and cash-flow investment story.\u201d<\/p>\n
\tThe conference call was a victory lap of sorts for Adelson, the 80-year-old billionaire who controls 53 percent of Las Vegas Sands through his personal and family holdings.<\/p>\n
\tAdelson all but took credit for creating Macau, the world\u2019s most lucrative gambling market, which produced a record $45.2 billion in gaming revenue in 2013 and is ahead of that total by 20 percent for the first three months of 2014. Wells Fargo Securities gaming analyst Cameron McKnight bullishly predicted Macau could reach $115 billion by 2018.<\/p>\n
\tAdelson wasn\u2019t far from the truth.<\/p>\n
\tHe was the first to recognize the potential of resort development in Macau\u2019s Cotai region and encouraged others, including Wynn Resorts Ltd. Chairman Steve Wynn, to join him. He was soundly rejected.<\/p>\n
\t\u201cIt was my vision. I created the Cotai Strip,\u201d Adelson said. \u201cEverybody thought in the past that it wasn\u2019t going to succeed.\u201d<\/p>\n
\tAdelson joked his competition would now \u201ccut off their right arm\u201d to develop there.<\/p>\n
\t\u201cToday I have a warehouse full of right arms,\u201d Adelson said. \u201cThere may be a few left arms in there.\u201d<\/p>\n
\tAdelson acknowledged Chinese tradition and attitudes toward gambling and \u201cchallenging luck,\u201d which dates back \u201c3,000 or 4,000 years\u201d to the era of Confucius, the Chinese philosopher whose principles and teachings form the basis of Chinese tradition.<\/p>\n
\t\u201cI never met Confucius,\u201d the octogenarian joked before adding that \u201cbeliefs that go on for 3,000 years are pretty hard to break.\u201d<\/p>\n
\tSo it\u2019s no surprise Las Vegas Sands isn\u2019t slowing its Macau growth plans. The company operates 9,000 hotel rooms there. That figure will jump to 13,000 rooms by 2016, when the St. Regis hotel expansion to Sands Cotai Central and the $2.7 billion Parisian Macau are completed.<\/p>\n
\tEven with other companies expanding in Macau, Las Vegas Sands will continue to maintain better than a 50 percent share of the overall hotel room market. The company controls the largest number of gaming tables, restaurant offerings, retail and entertainment venues in Macau.<\/p>\n
\tSusquehanna International Group gaming analyst Rachael Rothman said the tone of Adelson and other company executives was \u201csteady and bullish\u201d with no hint at a slowdown in Macau\u2019s growth prospects. She agreed.<\/p>\n
\t\u201cWe believe Las Vegas Sands is well positioned to continue to capitalize on the growth and profitability in the mass market segment given its market-leading room count, (gaming) position count and the continued infrastructure improvements built by the Chinese government aimed at increasing visitation to Macau,\u201d Rothman said.<\/p>\n
\tAdelson discussed some of the new ways to reach Macau. The massive Hong Kong-Zhuhai-Macau bridge is expected to open in two years, which will allow a 20-minute automobile commute from the Hong Kong International Airport. He also would also not be surprised if Macau ends up with a second international airport.<\/p>\n
\t\u201cIt was my vision to create the footprint that I thought was necessary and achieved critical mass,\u201d Adelson said. \u201cWe have done that.\u201d<\/p>\n
\tThere seemed to be little concern among analysts that revenue declined 7 percent for Las Vegas Sands\u2019 two Strip resorts in the quarter ended March 31, or that revenue declined 4.7 percent at the company\u2019s Sands Bethlehem in Pennsylvania.<\/p>\n
\tThe most telling comment about the company\u2019s prospects came from Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski.<\/p>\n
\t\u201cIn the end, we continue to contend Las Vegas Sands is a core name to own in every investors\u2019 portfolio, not just those looking for gaming industry exposure,\u201d Wieczynski said.<\/p>\n