Las Vegas Sands: Lodging
Lodging: LVS Lodging REIT would have the highest occupancy public portfolio in the hotel industry at approximately 90% to 15% growth -- and located in markets with demand growth far outpacing supply.
LVS Lodging has stronger growth prospects given rapid growth of gaming revenues, higher occupancy (90%), higher margins and less cyclical characteristics. LVS will be the leading owner of 4 star and 5 star hotels with 40% of the Macao room supply by 2013.
$25 lodging value per share: Given strong 15% growth prospects of Singapore/Macao, limited supply, less cyclicality and the substantial discount to replacement cost, these assets should be valued at EBITDA multiples of 14 times to 16 times based in private and public market comps, yet trade at a 40% discount.
Las Vegas Sands: Gaming
LVS Gaming would be the most profitable casino company in the world with internal and external growth likely to exceed 20% per year.
$48 Gaming Value per Share: Implied value at approximately twice 2013 EBITDA ($8 per share), after adjusting for the fair value of the malls and lodging, is severely penalizing what will likely be a 20% plus growth company that has traded on average since 2004 IPO at 18x forward EBITDA.
Winning Hand: Three-of-a-Kind
Las Vegas Sands should pursue a REIT spin-off strategy that will, in turn, provide maximum value (around $85 per share) for the spin-out of all (and integrated) businesses. Accordingly, investors will be able to tap into the Chinese growth engine and decide how to gain exposure to all or part of the Sands' differentiated high-quality real estate platforms.
As summarized by Land and Building's Founder and CEO, Jonathan Litt: "Having three public companies each focused on its own business, malls, hotels and casino will create the most value for shareholders as each company will be able to drive growth well beyond that of the individual assets they could otherwise sell."
Furthermore Litt explains, "Las Vegas Sands will generate over $3 billion in free cash flow annually likely growing 15% or more a year. This ordinary dividend combined with the special dividend puts the yield in excess of 8%. Like Wynn we suspect the special dividend will be recurring driving further return for investors."