Is Las Vegas Sands Stock A Buy With Macau On Cusp Of Recovery?

UKRAINE – 2021/06/27: In this photo illustration, a logo of Las Vegas Sands Corporation appears … [+] on a smartphone. (Photo illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)

SOPA Images/LightRocket via Getty Images

Shares of Las Vegas Sands have performed well over the past quarter or so, rising about 40% since the end of October 2022. The latest gains come as two big overshoots related to the Macau business – which accounted for over 60 The company’s first % – Pandemic revenue – seems to be easing. First, China’s State Council has lifted some restrictions on Covid-19, reducing mass testing, quarantine requirements and the use of the health code system. That could help spur a recovery in Macau’s casino market, which has seen gaming activity trend back to a fraction of 2019 levels amid a dramatic drop in tourist inflows. In addition, LVS and five of its peers have obtained temporary licenses to continue operating in Macau over the next 10 years. The Macau government also rejected an offer from another potential player that wanted to enter the market. The terms on which the licenses were offered also appear to be quite reasonable, with the Macau government requiring casino players to provide local employment, attract foreign tourists and expand their non-gambling offerings. This should help to ease some of the regulatory hurdles surrounding the stock.

So what’s the outlook for LVS stock? The financial performance of LVS has already increased in recent quarters. During the third quarter, revenues expanded by about 17% year over year, while net losses also narrowed. Growth has been driven by the Marina Bay Sands property in Singapore, which is seeing a surge in demand. MBS sales were up almost 3x year-on-year in the third quarter, and things are likely to remain strong, given Singapore’s reputation as a stable, high-value market. Furthermore, the eventual recovery in Macau should also help LVS significantly, given that the company has over 12,000 rooms that can meet the significant pent-up demand. The company’s liquidity position is also reasonable, with cash holdings at $5.8 billion as of September 2022. That said, there are risks. The recent surge in Covid-19 cases in China could somewhat delay the return of tourists to Macau, while the global economy also faces headwinds amid rising interest rates. LVS is also highly leveraged, with over $15 billion in total debt outstanding. We value LVS stock at around $49 per share, which is roughly in line with the current market price. See our Las Vegas Sands valuation analysis for more details on what drives our price estimate for the stock.

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