Las Vegas Sands
Las Vegas Sands (LVS - Get Report) stock has been pressured following news that it is being investigated by federal regulators both domestically and in China regarding potentially illegal business practices in Macau.
Shares of the casino giant have fallen more than 8% since it reported its fourth-quarter results in February.Sands China issued a statement earlier in the year saying it is being probed by Hong Kong Securities and Futures Commission for alleged breaches of regulation. Government officials in China "requested to produce certain documents." The company also received a subpoena from the Securities and Exchange Commission requesting the company provide compliance documents related to the Foreign Corrupt Practices Act. Las Vegas Sands has also noted that it is the subject of an investigation by the Department of Justice. The allegations stem from claims made by former Sands China CEO Steve Jacobs regarding the bribing of officials. Las Vegas Sands has publicly denied these allegations. Jacobs has claimed that he was fired from the company in July 2010 without cause after refusing to carry out demands made by Las Vegas Sands CEO Sheldon Adelson. Nonetheless, Las Vegas Sands should continue to benefit from strength in Macau and Singapore. Santarelli predicts that the company is poised to post another solid quarter of year-over-year property level EBITDA growth at each of its properties in Macau. The opening of Galaxy Cotai in May is also not expected to meaningfully upset Las Vegas Sands long-term growth story in Macau, according to Santarelli. "With April off to a fast start in Macau and recent color from Wynn management on the strength it is seeing in both Macau and Las Vegas, we believe second-quarter expectations are likely to, or already have, elevated," Santarelli wrote. "That said, we remind investors that Las Vegas Sands will face tough Macau comparisons." In Singapore, the focus will largely be on sequential improvement in VIP rolling chip volume at its Marina Bay Sands flagship. In Las Vegas, investors will be watching margins, given continued sluggishness of the Strip, Santarelli noted. The only potential snag in Las Vegas Sands' story would be the appearance of any new punitive headlines related to the ongoing investigation.