Las Vegas Sands
LVS
Las Vegas Sands’ Macau business – which accounted for over 60% of the company’s pre-pandemic revenue – is seeing a strong rebound after China relaxed its intense Covid-19 restrictions earlier this year. While Macau revenues trended to a fraction of 2019 levels amid a dramatic decline in tourist inflows in 2021 and 2022, casino players are seeing strong pent-up demand primarily from the mass-market segment, while the VIP segment is also showing signs of picking up. This should help drive growth for this quarter. That being said, Casino companies have been held back to an extent by a severe labor shortage, as many foreign employees working in the hospitality sector in Macau left through the pandemic. LVS, for perspective, indicated that it opened just about 7,700 rooms during Q1 2023, keeping over a third of its rooms closed due to manpower shortages. That said, things are likely to have improved a bit over Q2.
The company’s Marina Bay Sands property in Singapore, which is a stable and high-value market, should also fare well. Over Q1, the company indicated that the adjusted property EBITDA for Marina Bay Sands stood at $412 million, up over 3x versus last year, and about 95% of 2019 levels. Occupancy rates for hotel rooms were also robust standing at over 97%, with average daily rates standing at $594. Things could improve further over Q2, as tourist inflow into Singapore has picked up over the last few months.
While LVS stock could move higher if it beats earnings, we believe the stock is fully priced at current levels. We expect the company’s financial performance to continue improving going forward as demand in Macau increases. Las Vegas Sands’ liquidity position is also reasonable, with cash holdings standing at $6.5 billion as of March 2023. That being said, there are risks as well. LVS is also highly leveraged, with nearly $16 billion in total debt outstanding. Moreover, there are macroeconomic concerns as well, given a weaker-than-expected post-Covid-19 rebound in the Chinese economy. We value LVS stock at about $60 per share, which is roughly in line with the current market price. See our analysis of Las Vegas Sands valuation for more details on what is driving our price estimate for the stock.
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