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Las Vegas Sands: Only Up From Here


Las Vegas Sands' (LVS) third-quarter results could be just the catalyst needed to drive the stock higher.

The casino giant saw its third-quarter profit double to $353.6 million, or 44 cents a share, on revenue of $2.41 billion. On an adjusted basis, Sands earned 55 cents a share. This was better than Wall Street's estimates of 52 cents a share on revenue of $2.34 billion.

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"We believe third-quarter results will begin a new upward run for shares and is a catalyst for Las Vegas Sands' stock multiple to solidly surpass peers, something well overdue, in our view," Sterne Agee analyst David Bain wrote in a note.

Shares of Las Vegas Sands gained 5.2%, or $2.36, to $47.76 early Friday.

CEO Sheldon Adelson poked fun at analysts who doubted the company's success. "Please keep an eye out for one of our egg-wiping face towels, which you should be receiving shortly," he said.

These better-than-expected results were primarily a result of strength in Singapore and Macau.

The Marina Bay Sands in Singapore saw its adjusted property EBITDA surge 71% to $413.9 million, with margins hitting 52.2%.

"We continue to believe Singapore -- where Las Vegas Sands is in a casino duopoly situation -- is one of two primary reasons why Las Vegas Sands should trade above equity multiple in our gaming universe," Bain wrote.

There are several positives in Singapore that Bain said are underappreciated, including the opening of the country's MTR Metro stop access to Marina Bay Sands, an adjacent deep water cruise terminal scheduled to open in the second quarter next year, and an adjacent botanical garden.

In Macau, adjusted property EBITDA totaled $388.3 million, a 16% increase from last year.

"We believe the company will be increasing its underperforming VIP fair share beginning late this year with the introduction of new junket operators," Bain, who increased his price target on the stock to $65 from $60, noted. He believes this alone will increase EBITDA by about $125 million in 2012.

Sands' Cotai Central, with the first phase opening in the first quarter next year, will also likely be the only new supply in Macau for at least three years.

The Venetian and Palazzo in Sin City delivered EBITDA growth of 61.7% to $93.4 million.

J.P. Morgan analyst Joseph Greff also took his price target up $5 to $64, while Nomura Equity Research analyst Harry Curtis raised his price target to $62 from $58.

"We believe Las Vegas Sands' growth prospects are superior to anything else in our coverage universe, given its strong positioning in the growth markets of Macau and Singapore," Greff wrote in a note.

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