Sands Las Vegas Departure Speculation Stirs Differing Views Among Analysts

Posted on: October 27, 2020, 09:31h. 

Last updated on: October 27, 2020, 10:36h.

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

Late Monday, Las Vegas Sands (NYSE:LVS) rocked the gaming world, confirming it’s in early stage talks that could result in the company selling its Nevada assets for $6 billion. A day later, Wall Street is divided over whether or not the operator will actually abandon the largest US gaming center.

Venetian Las Vegas
The Venetian Las Vegas. Analysts are divided over whether or not Sands will ultimately sell its Las Vegas assets. (Image: CNBC)

Sands Convention Center and the Venetian and Palazzo integrated resorts are the gems LVS could part within a “leaving Las Vegas” scenario. Those moves would allow the company to focus on Asia-Pacific operations in Macau and Singapore while avoiding what’s viewed as a lengthy coronavirus pandemic recovery timeline in Sin City. Bank of America said it’s possible LVS ultimately doesn’t abandon Las Vegas.

While there could be some strategic merit, we are cautious on the likelihood here, at this price, given 1) limited liquidity or cash needs, 2) a dearth of potential buyers, especially for a sizable OpCo and 3) Las Vegas being the corporate center of the company,” said the bank in a note to clients.

The bank adds that in any environment, the number of buyers that can write checks for $6 billion worth of real estate is small,“ but post-COVID and with negative earnings today, we think it is even smaller.”

Positive Outlook for LVS

BofA did, however, note that the chatter regarding Sands Convention Center and the two Strip gaming venues is a reminder of the advantages of LVS retaining property ownership, something many rivals have not done. The bank reiterated a “buy” rating and a $61 price target on LVS stock.

Roth Capital’s David Bain takes a different view, noting the sale of the Las Vegas assets would be a positive for LVS while presenting a connotation that’s “flat to negative” for rival Wynn Resorts (NASDAQ:WYNN) and outright negative for MGM Resorts International (NYSE:MGM), which is the largest operator on the Strip.

Bain says LVS selling its Vegas assets could set the stage for the company to move its headquarters to Macau or somewhere else in Asia ahead of the 2022 concession renewals in the world’s largest gaming center, adding that Sin City divestments could pave the way for the operator to restore its dividend. Sands suspended its payout in April, citing the pandemic, and if it goes 12 months without a dividend, it’ll save $2.34 billion.

A Nevada sale also presents the company with an “even greater ability to invest in significant worldwide gaming assets, which could offer far larger and stronger returns than its current basket of Las Vegas assets,” said the analyst.

Mixed Reviews for Wynn

Bain notes that, on the surface, LVS perhaps commanding $6 billion for the aforementioned Strip assets could be a positive for competitors such as MGM and Wynn. However, he adds, investors shouldn’t make direct comparisons. Sands Convention Center, Venetian, and Palazzo hold “unique” market positioning and aren’t similar to other assets that could come up for sale in the area.

He sees LVS potentially leaving Las Vegas as “mixed” for Wynn, because the latter owns its Strip real estate, giving it some optionality.

“For MGM, we view a potential transaction as a mild negative given the connotation of such a potential divesture by LVS and overall lack of owned Strip land assets,” said Bain.