Company Reports

We expect Las Vegas Sands' Macao resorts (54% of 2023 EBITDA) will continue to see strong revenue growth in 2024 after China's removal of covid-19 restrictions in January of 2023. We also think Las Vegas Sands and the Macao gaming enclave are well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip in Macao, but we think it will reinvest back into its assets within the region, strengthening the brand locally. To this point, Sands has recently completed $2.2 billion worth of investments in converting one of its Cotai properties to a London-based theme and upgrading its rooms at its Four Seasons resort. Futher, it will be investing another $1.2 billion in 2024 to renovate rooms at its Conrad and Sheraton locations and upgrade its Cotai arena facility. Meanwhile, Sands' position in the profitable Singapore gaming market (46% of 2023 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2023-25 and eventual development of a fourth tower, which we think can open toward the end of 2028, solidifying our view of the firm's long-term growth.

Our main takeaway from narrow-moat Las Vegas Sands’ first quarter is that near-term investments in its Macao properties are causing near-term sales share loss. In this vein, Sands’ Macao revenue grew 42% from last year in the quarter, compared with industry gross gaming revenue growth of 65%. At the heart of Sands’ $1.2 billion ongoing Macao portfolio investment this year was the decision to close its 15,000-seat Cotai arena in January, as it spent the next several months upgrading the facility. As a result, only 12 shows took place in the quarter versus 31 a year ago. Also, the firm is renovating its Sheraton hotel rooms, taking a few hundred keys off the market this year.

Thailand moved closer to legalized gambling this month with the completion of a gaming draft bill, setting the stage for a law as soon as this year, based on reports of strong government support. We don’t believe the prospect of Thailand gaming resorts will have any material impact on demand for casinos in Macao, Singapore, or Japan for the foreseeable future. We are maintaining our fair value estimates of $61 for narrow-moat Las Vegas Sands, $122 for narrow-moat Wynn Resorts, and $55 for no-moat MGM Resorts. We rate all three as undervalued.

We expect Las Vegas Sands' Macao resorts (54% of 2023 EBITDA) will continue to see strong revenue growth in 2024 after China's removal of COVID-19 restrictions in January of 2023. We also think Las Vegas Sands and the Macao gaming enclave are well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip in Macao, but we think it will reinvest back into its assets within the region, strengthening the brand locally. Meanwhile, Sands' position in the profitable Singapore gaming market (46% of 2023 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2023-25 and eventual development of a fourth tower, which we think can open toward the end of 2028, solidifying our view of the firm's long-term growth.

Las Vegas Sands’ fourth-quarter sales lifted 161% with EBITDA margins expanding to 41.1% from 19.9%, driven by the recovery in Macao and lasting strength in Singapore. With results near our expectations, we don’t plan a material change to our $60 fair value estimate and see shares as undervalued.

Las Vegas Sands' Macao resorts (66% of 2019 EBITDA) is seeing strong revenue growth in 2023 after China's removal of COVID-19 restrictions in early January. We continue to think Las Vegas Sands and the Macau gaming enclave are also well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip, but we think it will reinvest proceeds from the $6.25 billion sale of its Vegas assets (closed in early 2022) in its Asian assets, strengthening the brand locally. Meanwhile, Sands' position in the profitable Singapore gaming market (34% of 2019 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2023-25 and eventual development of a fourth tower, which we think can open in 2029, solidifying our view of the firm's long-term growth.

Las Vegas Sands shares popped 5% as the firm's Macao and Singapore assets continued to see a demand and profitability recovery in the third quarter. We plan to lift our $59 valuation around $1-$2 for time value and slightly higher-than-expected near-term Macao profits, leaving shares undervalued.

Las Vegas Sands' Macao resorts (66% of 2019 EBITDA) are positioned to see strong revenue growth in 2023 after China's removal of COVID-19 restrictions in early January. We continue to think Las Vegas Sands and the gaming enclave are also well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip, but we think it will reinvest proceeds from the $6.25 billion sale of its Vegas assets (closed in early 2022) in its Asian assets, strengthening the brand locally. Meanwhile, Sands' position in the profitable Singapore gaming market (34% of 2019 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2023 and development of a fourth tower scheduled to open in 2028, solidifying our view of the firm's long-term growth.

Sands shares moved lower 3% after hours following its second-quarter results on the potential for lower dividend payouts and delay in construction of a fourth tower in Singapore. But we plan to lift our $57 fair value estimate about $2 per share to account for a stronger Macau gaming revenue recovery in 2023, which we think should be the focus for investors. We see shares as fairly valued.

Las Vegas Sands' Macao resorts (66% of 2019 EBITDA) are positioned to see strong revenue growth in 2023 after China's removal of COVID-19 restrictions in early January. We continue to think Las Vegas Sands and the gaming enclave are also well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip, but we think it will reinvest proceeds from the $6.25 billion sale of its Vegas assets (closed in early 2022) in its Asian assets, strengthening the brand locally. Meanwhile, Sands' position in the profitable Singapore gaming market (34% of 2019 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2023 and development of a fourth tower scheduled to open in 2027, solidifying our view of the firm's long-term growth.

We plan to lift our $52 per share Las Vegas Sands fair value estimate by a high-single-digit percentage, driven by stronger Macao (66% of 2019 EBITDA) profitability and demand in Singapore (34%). We see shares as slightly overvalued but think continued demand recovery in Macao and Singapore will serve as a catalyst for Sands’ shares during 2023.

Las Vegas Sands' Macao resorts (66% of 2019 EBITDA) are positioned to see strong revenue growth in 2023 after China's removal of COVID-19 restrictions in early January. We continue to think Las Vegas Sands and the gaming enclave are also well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip, but we think it will reinvest proceeds from the $6.25 billion sale of its Vegas assets (closed in early 2022) in its Asian assets, strengthening the brand locally. Meanwhile, Sands' position in the profitable Singapore gaming market (34% of 2019 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2023 and development of a fourth tower scheduled to open in 2027, solidifying our view of the firm's long-term growth.

January 2023 Macao industry gross gaming revenue, or GGR, surged to over 40% of 2019’s level (up 83% year over year) versus the midteens level seen during 2021, helped by the removal of travel restrictions on Jan. 8 ahead of the Chinese New Year holiday. The results represent the strongest month of gaming demand since January 2020 (before travel restrictions were fully implemented). This buoys our long-held view that there is a global human-ingrained desire to travel and supports our decision last month to lower the Uncertainty Rating to High from Very High for Macau exposed companies Wynn and Las Vegas Sands. That said, there are factors that could make the recovery volatile over the coming months. First, this year’s January included the New Year holiday, which was in February during 2019, making for a tougher comparison with prepandemic marks for this current month. Also, various reports indicate that the reopening of Macao to Hong Kong in January resulted in the majority of visitation during the New Year holiday coming from that region were versus the high-teens percentage the region averaged in 2019, and it remains to be seen how much of this pent-up demand can endure. Finally, there could be additional COVID-19 variants during the coming months that might impact demand. We plan to monitor gaming trends closely and maintain our forecast for 2023 industry GGR to reach around 50% of 2019’s level, or more than a 200% year-over-year increase, followed by a near full recovery in 2024.

Las Vegas Sands’ shares jumped 5% after hours after its fourth-quarter update showed Macao (66% of 2019 EBITDA) demand recovery in January after the removal of COVID-19 restrictions on Jan. 8. We maintain our long-held constructive view on the company’s leading regulatory edge (the source of its narrow moat) in Macao and Singapore (34% of 2019 EBITDA). We still expect Macao’s industry gaming recovery to recover to 50% and 90% of 2019’s level in 2023 and 2024, respectively, up sharply from the 14.4% posted in 2022, which could continue to provide a catalyst for shares. Nevertheless, we no longer view shares as undervalued after the 60%-70% appreciation seen from the lows posted in both 2021 and 2022, resulting in a 16 times forward-year EV/EBITDA multiple (12 times on 2024 estimates), versus the 12 times forward-year multiple received prepandemic. We don’t plan to materially change our $49 fair value estimate.

We are lowering our Uncertainty Rating to High from Very High for narrow-moat companies Wynn Resorts and Las Vegas Sands, driven by a rapid easing of Macao's COVID-19 policy over the past month, which we think is likely to endure. We have improved certainty around our existing base-case assumption that industry gross gaming revenue can rebound to 50% of 2019’s level this year versus a midteens level in 2022. We maintain our fair value estimates of $49 for Sands and $107 for Wynn, leaving the latter undervalued, in our view.

Although the pandemic continues to materially affect near-term demand in Macao (66% of 2019 EBITDA), we see headwinds subsiding as a result of China easing its COVID-19 policy in December 2022. We continue to think Las Vegas Sands and the gaming enclave are well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip, but we think the company will reinvest proceeds from the $6.25 billion sale of its Vegas assets (closed in early 2022) in its Asian assets, strengthening the brand locally. Meanwhile, Sands' position in the profitable Singapore gaming market (34% of 2019 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2022-23 and development of a fourth tower scheduled to open in 2026, solidifying our view of the firm's long-term growth.

We no longer see Las Vegas Sands' shares offering a compelling risk/reward, after appreciating more than 30% since late October. Sands' shares have reacted positively to recent news of a provisional 10-year gaming license renewal in Macao (66% of precoronavirus EBITDA), supporting the company’s regulatory intangible asset advantage, the source of its narrow moat, as well as some easing of travel restrictions in greater China (reopening of e-visa applications, and reduced quarantine and testing requirements).

This weekend’s news of provisional 10-year gaming license renewals for the six existing Macao operators removes an overhang on gaming operators’ shares. However, the news was expected, and the larger near-term unknown remains the demand impact from China's COVID-19 zero-tolerance policy. We maintain our $49, $107, and $48 fair value estimates on Las Vegas Sands (narrow moat), Wynn (narrow moat), and MGM (no moat), respectively. We rate Sands as near fair value but Wynn and MGM as undervalued. We think shares of all three might remain volatile until China moves further beyond its restrictive pandemic policy, which could occur in early 2023 when new government leadership positions take office.

Although the pandemic and government regulation continue to materially affect near-term demand in Macao (66% of 2019 EBITDA), we still think Las Vegas Sands and the gaming enclave are well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip, but we think the company will reinvest proceeds from the $6.25 billion sale of its Vegas assets (closed in early 2022) in its Asian assets, strengthening the brand locally. Meanwhile, Sands' position in the profitable Singapore gaming market (34% of 2019 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2022-23 and development of a fourth tower scheduled to open in 2026, solidifying our view of the firm's long-term growth.

Narrow-moat Las Vegas Sands' third-quarter results showcased a tale of two cities, with Singapore (34% of 2019 EBITDA) demand benefiting from its April reopening, and Macao (66%) suffering from the Chinese government's steadfast battle against COVID-19 with stringent measures.