Sands China’s Q4 Remained in Loss; Management’s Comment on Strong Demand Recovery Is Encouraging

Sands China’s sluggish fourth-quarter results contain little surprise, but management’s upbeat comment on Lunar New Year performance is encouraging, in which we see strong recovery across all segments in terms of both traffic volume and customer spending. This reaffirms our view that a maintainable recovery of gaming demand is underway. We maintain our assumption of industry gross gaming revenue, or GGR, returning to 50% of 2019's level in 2023, up from 14.4% in 2022. We raise our fair value estimate for Sands China to HKD 24.50 per share from HKD 23.50, after rolling our model one year forward, and we expect Sands China’s adjusted EBITDA to come in at a positive USD 1.3 billion in 2023, compared with a negative USD 324 million in 2022. With share prices more than doubling over the past three months, we think the shares are fairly valued as of market close on Jan. 26. That said, we believe the restart of group tours to Macao remains a potential catalyst that will likely support share prices in the near term, given Sands China is the key beneficiary.