Las Vegas Sands Drawing a Crowd

Investors will soon be able to bet on another flashy casino stock, with the initial public offering of the Las Vegas Sands Corp. expected Tuesday.

Business is booming in Las Vegas and stocks in casino companies have been riding high this year, with the Dow Jones Casinos Index up more than 25% year to date. By comparison, the S&P 500 is up about 7%, and the Dow Jones Industrial Average has gained only about 1%.

Investors appear eager to pick up shares of Las Vegas Sands, which counts among its properties The Venetian Casino Resort on the Las Vegas Strip, a luxury resort complete with gondola rides and a replica of Venice's St. Mark's Square. The Venetian stands on storied ground: the site of the old Sands Hotel and Casino. Razed in 1996, the Sands was a favorite hangout of Rat Packers like Dean Martin, Frank Sinatra and Sammy Davis Jr.

Demand was strong enough to allow the Las Vegas-based company to up its price target Friday. In a filing with the Securities and Exchange Commission, Las Vegas Sands said it estimated the offering price would be $24 to $26 a share, vs. the previous range of $20 to $22 a share.

The company has filed to sell 23.8 million shares, although underwriters led by Goldman Sachs & Co. may opt to purchase an additional 3.5 million shares. All told, the offer could raise $711.9 million.

Assuming 23.8 million shares sell at the midpoint of the current price target, Las Vegas Sands would have an initial market capitalization of $8.75 billion. Public shareholders will own 6.8% of the stock. Sheldon Adelson, the company's chairman and CEO, and trusts for his family members will hold an 87.9% stake, with company directors and senior executives accounting for the remaining 5.3%.

Following the IPO, the Las Vegas Sands Corp. stock is expected to trade on the New York Stock Exchange under the symbol LVS.

In addition to The Venetian, the company's Las Vegas holdings include the Sands Expo and Convention Center, a 1.15 million-square-foot convention and trade show complex that benefits from midweek conference business. In a filing, the company said midweek occupancy at the facility was 97.2% in the first nine months of the year, better than the 86.9% Las Vegas average.

Also in Las Vegas, the company is spending $1.6 billion to build the Palazzo Casino Resort, with a grand opening set for the second quarter of 2007.

For the nine months through September, the operating company that essentially will become The Las Vegas Sands Corp. earned $12.5 million on $832.7 million in net revenue.

With its big Las Vegas properties, the company competes with MGM Mirage ( MGG), which is working to close its acquisition of Mandalay Resort Group ( MBG), and Harrah's Entertainment ( HET), which is in the process of acquiring Caesars Entertainment ( CZR).

"Through these consolidations, the sector has been very hot, which should give Las Vegas Sands an extra boost when it hits the market," wrote analysts at Renaissance Capital's IPOhome.com. (Neither Renaissance nor its analysts have stakes in Las Vegas Sands, and Renaissance does not do business with the company. Renaissance may acquire shares once Las Vegas Sands goes public.)

But Las Vegas Sands is also working hard across the Pacific. Its Sands Macao Casino opened in May in the former Portuguese colony, now part of China. The city is the only Chinese location that permits casino gambling. The company also plans to build a Macao version of The Venetian by 2008 for $1.8 billion.

Its Macao business also makes it a close competitor with casino tycoon Steve Wynn's Wynn Resorts ( WYNN).

"Las Vegas Sands' closest comparable competitor may be Wynn Resorts," the Renaissance analysts wrote, noting Wynn plans to open a high-end luxury casino across from The Venetian early next year and a Macao casino in 2007. The analysts believe there may be upside to Las Vegas Sands' current price range, given Wynn's valuation.

Although Renaissance is bullish overall on the IPO and calls it a "golden opportunity," its analysts do have some concerns. "After the construction of its two developing properties, the company will still be dependent on a handful of entities in only two markets," they wrote. "Additionally, there are some operating risks associated with Macao, including gaming concession restrictions and travel restriction by the Chinese government."

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