Go-Go casino operator Las Vegas Sands (LVS ) saw its stock plummet in July from 77 to 60 when investors began to worry that its dominance in Macao was under threat. They panicked because Wynn Resorts (WNN ) will open operations there on Sept. 6. After the sell-off, the stock rebounded to 65.69 by Aug. 23. "The drop was unjustified," says Charles Norton of GNI Capital, which owns shares. "We aim to be long-term investors because Sands will remain No.1 in Asia." He thinks Wynn will need two years to catch up in Macao, the only place in China where casinos are currently legal, and where gamblers spent $5.6 billion in 2005. By then, says Norton, Sands will have opened a second Macao casino -- as well as the first casino in Singapore. In Las Vegas, where its Venetian is drawing high-rollers in droves, Sands will open the Palazzo in 2007. Analysts say it will be the largest convention resort in the world. Rod Petrik of Stifel Nicolaus, which has done business with Sands, rates it a "buy" and figures the stock is worth 80 on a sum-of-the-parts basis, excluding the Singapore unit, a yet-to-be-approved project in Hengqin in China, or a proposed casino in Pennsylvania. Petrik forecasts 2006 earnings of $1.46 a share on sales of $2.1 billion, rising to $2 in 2007 on $3.4 billion, vs. $1.17 on $1.7 billion last year.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial