Las Vegas Sands China CEO Steps Down

Las Vegas Sands (LVS) was in quite the predicament in 2014. With a government crackdown in Macau, where the Las Vegas-based casino takes in 67% of its revenue, the company’s stock was down over 30 percent. And now, amid such turbulent times the Chinese gambling sector has never known, Las Vegas Sands China CEO Edward Tracy has announced he will retire in early March.

“Transition to be Smooth”

The announcement, while wholly unexpected, isn’t necessarily what you would think considering how poorly the region did last year. Tracy apparently has had no disagreements with the company and has not been officially blamed in any way. He simply cited the desire to return to the United States to focus on family and his health, and that he will stay on as a consultant to the company.

According to a Bloomberg interview with D.S. Kim, a Hong Kong-based analyst at JPMorgan Chase & Co. “We expect the transition to be smooth and do not expect this news to have any major impact on fundamentals, including the schedule for new projects.”

Not Giving up on Macau

Of the new projects Kim alluded to, the main one is a resort Las Vegas Sands finally received approval for in late December. The Parisian Macau, as it will be called, will be a 3,000-room resort designed to diversify the Macau experience, going beyond just gambling. It will offer—in addition to plenty of gambling options—dining, bars, meeting and convention space, and entertainment.

In total, the new resort will be completed by the end of 2015 and will cost the company $2.7 billion. This should be a boon to Las Vegas Sands as its target market is the mass market rather than VIP gamblers, which were largely the target of the government crackdowns that stagnated the market. That being said, Las Vegas Sands’ push toward appealing to the mass market should give it a leg up on competitors in the area.

Dividing and Conquering Asia

Of course, the VIP gambling scene in Macau may never recover fully, so it’s also important to see where else Las Vegas Sands is expanding. Japan has been a huge target for casinos as lawmakers mull whether or not to legalize gambling (Las Vegas Sands has made a bid to invest $15 billion into a resort there).

While talks have stalled in that country, though, South Korea, which already has a gaming structure in place, is also a good option for expansion, one which CEO Sheldon Adelson has repeatedly expressed interest in. The only downside is that South Korea only allows foreigners to gamble at its large resorts. Locals are only allowed to gamble at one casino, which generates more revenue than the 16 large resorts combined.

Conclusion

All in all, Las Vegas Sands seems to be a value option for 2015. While the Macau market recovery may be slow, the new Parisian Macau resort and other East Asia opportunities should give investors confidence that it can and will recover nicely.