Question of the Day - 20 October 2019

Sheldon Adelson, CEO of Las Vegas Sands, is suffering from Hodgkin’s lymphoma (a much more treatable condition nowadays) and the state of his health is a closely guarded secret. University of Nevada-Las Vegas history professor Michael Green says, “I seem to recall there was a public appearance not too long ago, but I've also heard rumors that he's in bad shape.”

The Hodgkin’s comes atop of a case of neuropathy that has long impaired Adelson’s mobility. He's had to use a scooter to get around at least as far back as the 2012 election. Adelson’s visibility has been curtailed of late. He’s not been on investor conference calls and when Wall Street analysts meet with Sands brass, Adelson is absent.

On the other, he traveled to Israel to testify in the trial of Prime Minister Benjamin Netanyahu (nothing can deter Adelson when he has an axe to grind). He was also in sufficiently good health to call Donald Trump, as reported in the Wall Street Journal, and warn that the escalating trade war with China was perilous for the president in the 2020 election cycle. During the conversation, the WSJ reported, Adelson refrained from mentioning his Chinese casinos, which could be confiscated (admittedly a drastic scenario) if Peking is displeased with Trump. Adelson’s Macau casino empire is coming up on a 2022 concession renewal and everyone is slightly apprehensive that the new regime in Macau could put the six concessions up for re-bid, rather than simply renewing them.

Although Adelson and Las Vegas Sands have always be synonymous, if not symbiotic, his illness hasn't engendered any apprehension on Wall Street that we've been able to detect. Sands was just added to the S&P 500. The Simply Wall St. blog rates LVS shares as “fairly cheap” with a great potential to appreciate to as much as $90.15/share. “Las Vegas Sands’s earnings over the next few years are expected to increase by 62%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value,” added the anonymous author. In other words, buy.

Even if Sheldon Adelson should, God forbid, have to be removed completely from Las Vegas Sands, a firm succession is in place, headed by company President Rob Goldstein, a longtime Adelson associate. As for a breakup of the company, it makes no sense, although Sands recently shed its Bethlehem, Pennsylvania, casino after having spent years agonizing over what a poor fit it was with the company’s other assets.

Simply put, Las Vegas Sands is greater than the sum of its parts. The Macau casinos are the main revenue driver, but Marina Bay Sands in Singapore also generates considerable cash flow for the company (and its contract with the state has been renewed through 2030). Macau can be volatile, which is where the steady performance of Venetian/Palazzo in Las Vegas comes in handy, not to mention that they're powered by the premier convention facility in Sin City, Sands Expo Center. Chopping these crown jewels up into assorted discrete stones would be penny wise and pound foolish — especially when Sands has an excellent chance of penetrating the Japanese market in a few years. This is a company poised for continued growth, not dissolution. (Incidentally, Steve Wynn left Wynn Resorts in part because the stock was in free fall due to his sex scandal.)

Adelson may be out of view, but that never means he’s not pulling the strings. Las Vegas Sun Publisher Brian Greenspun just sued the mogul, contending that he’s trying to manipulate the Sun’s joint operating agreement with Adelson’s Las Vegas Review-Journal to put the Sun out of business and give Adelson the only mouthpiece in town. Which sounds just like what Sheldon would do. No, we’re not to worried about him. He's still firmly in character and will be, we predict, as long as he lives.