When is the right time to get into the Las Vegas Sands action?
In March, Las Vegas Sands (NYSE: LVS) announced the sale of the Venetian Las Vegas to pursue strong growth opportunities in the United States and abroad. With the re-application of the restriction measures in Guangdong, Macau’s casino activity is likely to face headwinds in the short term due to the low number of tourists. Sands has a strong presence in Macau and the resumption of non-quarantine travel from mainland China is key to its recovery in revenue. However, casino spending, which largely includes gambling taxes, accounts for around 50% of total spending. As a result, the company recorded just $ 1.3 billion in operating cash outflows despite a 74% contraction in revenue last year. Considering Sands’ leadership in the mass gaming industry in Macau, the likelihood of entering the U.S. sports betting industry, and the expansion of Marina Bay Sands, Trefis believes the title is ready for action. long-term gains. We highlight historical trends in LVS income, earnings and share price
Comparison of financial indicators with MGM Resorts
In 2019, Las Vegas Sands and MGM Resorts reported $ 13.7 billion and $ 12.9 billion in total revenue, respectively. With higher exposure to Macau, Sands’ revenue saw a 74% (YoY) contraction compared to 60% (YoY) by MGM Resorts in 2020. Notably, both companies have debt to long term comparable of about $ 13 billion on their balance sheet. As Sands leaves the Las Vegas gaming market to explore better opportunities, MGM Resorts has a strong presence in Las Vegas and other parts of the United States.
Interestingly, MGM Resorts shares are trading 35% above pre-Covid levels, aided by the growing popularity of its sports betting app, while Las Vegas Sands shares are nearly 20% below pre-Covid levels. -Covid. Does this indicate a good buying opportunity at Las Vegas Sands? (Note: explained in our previous article below)
[Updated 03/18/2021] – Asian wallets and sports betting can generate higher returns
Earlier in March, Las Vegas Sands (NYSE: LVS) took a historic step by announcing the sale of its Vegas property to Apollo Funds and VICI Properties for $ 6.25 billion. With several states legalizing sports betting, the company’s peers including MGM Resorts, Penn National Gaming
Contribution to Sands revenue and margin in different geographies
In 2019, Sands’ properties in Macau, Singapore and Vegas contributed 63%, 22% and 15%, respectively, to $ 13.7 billion in revenue. More importantly, Vegas properties recorded the lowest EBITDA margin of 26% versus 54% by Singapore and 36% by Macau. Thus, investor returns are primarily driven by Sands’ activities in Macau and Singapore.
As the company reinvests the capital from Vegas real estate sales in assets that have the potential to generate a high EBITDA margin of 54% (as Singapore property does) over the long term, shareholders will benefit from higher profitability and profitability. an expanding turnover. – resulting in long-term capital gains.
What if Sands allocated excess liquidity to Singapore and reduced its debt burden?
In 2019, Sands announced the Singapore-owned Marina Bay Sands expansion plan with a target cost of $ 3.4 billion. The expansion project will increase the number of rooms by almost 50% with a similar growth expectation in other segments including games, store rentals and food services. With higher capacity, Sands’ EBITDA from Singapore can increase by 50%, resulting in excess return on invested capital. Thus, the stock has a strong upside potential from current levels assuming the company’s new investments generate returns comparable to Marina Bay Sands.
Along with a potential entry into the US sports betting and iGaming industry, the company also sought acquisition targets in Asia. Thus, the paid-up capital opens up a plethora of opportunities for the company and of probable gains for the shareholders.
Do Las Vegas Sands Peers Offer Better Payouts? Comparison of Las Vegas Sands stocks with peers summarizes how LVS stacks up against its peers on the metrics that matter. You can find other useful comparisons at Peer comparisons.