Las Vegas Sands: Lots to Like Long-Term, Says Analyst

Posted on: July 22, 2022, 04:06h. 

Last updated on: July 25, 2022, 04:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Las Vegas Sands (NYSE:LVS) reported second-quarter earnings earlier this week, with the casino operator posting increasing losses. But signs of recovery in Singapore have analysts optimistic about the long-term case for the beleaguered shares.

Las Vega Sands
Marina Bay Sands in Singapore. An analyst remains bullish on the long-term thesis for operator Las Vegas Sands. (Image: Marina Bay Sands)

In a new note to clients, Macquarie analyst Chad Beynon reiterates an “outperform” rating on Las Vegas Sands, noting the long-term case for the stock remains sound. He has a 12-month price target of $45 on the Venetian Macau operator, implying upside of 15.3% from the July 22 close.

We remain believers in the long-term LVS story, given our view that the company is best positioned in Macau to grow share and stomach any concession renewal requirements,” wrote Beynon. “Currently, we see Macau as a coiled spring with significant pent-up demand waiting to be unleashed.”

Among US-based companies that aren’t a manufacturer of semiconductors, only a handful depend on China for a larger percentage of revenue than Sands. Among gaming operators, only Wynn Resorts (NASDAQ:WYNN) derives a bigger chunk of its top line from China than does Sands.

Singapore Sands’ Salvation

Macau casinos are slated to reopen Saturday following a nearly two-week closure because of a surge in coronavirus cases. Analysts widely expect recovery in the world’s largest gaming center to start next year. They anticipate the special administrative region’s (SAR) gaming industry not beginning to look like its pre-pandemic self until 2024.

That’s confirmation that Macau concessionaires need geographic diversity. Although it operates five venues in the SAR, LVS also runs Marina Bay Sands in Singapore. That integrated resort is a source of strength for Sands and by some estimates, represents roughly half the company’s market capitalization.

“However, LVS’ 2Q results highlight that Singapore, despite air capacity being at <50%, has recovered to 90% pre-pandemic mass market revenues,” adds Beynon. “With arguably better spend/visit (pent-up demand) than even the US, we believe this bodes well for a Macau recovery, which many may still doubt.”

Marina Bay Sands is one of just two gaming venues in the city-state. The other is Genting Singapore’s Resorts World Sentosa. The pair enjoy long-term duopoly protection from the local government.

Las Vegas Sands Expansion Opportunities

The Sands portfolio consists entirely of the five Macau venues and Marina Bay Sands. The operator has no US footprint following the sale of its Las Vegas assets. Macquarie’s Beynon believes the company is selectively evaluating expansion opportunities in other locations.

“LVS remains well-positioned for organic growth but remains focused on home-grown greenfield opportunities in Asia or selective markets in the US, including New York,” concludes the analyst.

Sands has also been tied to gaming expansion efforts in Florida and Texas in the US. In Asia, there’s speculation the operator is in talks to bring an integrated resort to Thailand eventually. But the company hasn’t publicly commented on that matter.