Equity Value
The key though is how much equity is in Macau?
Total Macau level-debt is about $3.4 billion. Sands' operating casinos are
worth around $4.5 billion and its ferry line around $350 million, suggesting a
book value of around $1.5 billion for the business.
Applying a 2.3x multiple to the casino assets would suggest around $2.65
billion in value. The unprofitable ferry line should be worth around book
value, suggesting a total $3 billion for the functioning Macau businesses -
just under around half of Sands' total market worth.
The unfinished Cotai sites are recorded at $1.7 billion.
Assume the 790 tables and 3,500 slot machines at the new casino generate a
very conservative $1.95 billion in revenue annually, with a 15% Ebitda margin
that results in about $290 million annually. Given other operators easily trade
at 9 times enterprise value to Ebitda that suggests a $2.6 billion value for
the casino alone.
Realistically, though the sites unless completed have limited value. But if
Sands earmarked new funds to paying down debt and restarting development it
could be a draw for investors looking for equity access to new Cotai
properties. Bankers and management could plausibly argue the unfinished sites
are worth book value, pushing Macau's equity value to around $4.7 billion.
Selling off just under half of the Macau assets at, say, $2.5 billion would
allow the Adelson family to keep their close hold on their casino empire as
well as finish off at least part of their vision for the Cotai Strip.
In the meantime, Sands management will probably be watching across the road
at Melco's new City of Dreams complex. Competition may have heated up in Macau
since Sands first opened up in 2004 breaking a local gaming monopoly but it
should hope Melco's own gamble pays off. For City of Dream's success is likely
to be the barometer by which new investors judge how keen they are to ply fresh
capital into indebted Las Vegas Sands.
(Jamie Miyazaki is a columnist for Dow Jones Newswires covering Asia. He can
be reached at +852 2832 2320 or by email: jamie.miyazaki@dowjones.com. To
ensure continued access to the best of Dow Jones news and opinion on companies,
sectors and deals for bankers and research analysts, please contact
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