Las Vegas Sands Remains Preferred Idea for Macau Recovery

Posted on: December 6, 2020, 03:53h. 

Last updated on: December 6, 2020, 10:26h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Macau visitation trends are perking up and data confirms gross gaming revenue (GGR) is improving following a lengthy, coronavirus-induced slide for much of this year. That’s prompting some analysts to reiterate bullish views on Las Vegas Sands (NYSE:LVS).

Las Vega Sands
The Parisian Macau. An analyst is bullish on operator Las Vegas Sands. (Image: CNBC)

Shares of the largest Macau operator jumped 6.22 percent last week, a period including the special administrative region’s (SAR) November GGR report. Gaming revenue in the Chinese territory slumped 70.5 percent to $844 million USD in the eleventh month of the year. But that was two percentage points better than the October reading and a sharp improvement over the previous months that included a stretch of declines of at least 90 percent.

With mass market players driving Macau’s near-term recovery, LVS can capitalize on the rebound in the world’s largest casino center.

Given our expectation for continued outsized growth within Macau’s mass market gaming segment once this virus noise dies down, we continue to favor exposure to Macau’s most dominant mass market player, Las Vegas Sands,” said Stifel analyst Steven Wieczynski in a recent note to clients.

The analyst has a “buy” rating on LVS, which is lower by almost 13 percent year-to-date. But the stock is showing considerable momentum in recent weeks, soaring 20.44 percent over the past month.

Catalysts Abound for LVS Upside

Macau is the largest market for Sands and the company operates five integrated resorts there, intimately levering it to the SAR’s recovery trends.

LVS could offer investors more upside as Macau bounces back. In a broader sense, easing tensions between the US and China, which could be ushered in with the Biden Administration, and encouraging developments on the coronavirus vaccine front are positives for Macau operators. Specific to Sands, it’s opening its long-awaited Londoner Macau in February.

“Although we expect lingering Chinese macroeconomic uncertainty and virus fears to elevate trading volatility in the near term, we see nothing out there at this point capable of tempering our long-term enthusiasm on the name,” said Wieczynski.

The analyst advises investors to use weakness in LVS stock, which is heralded as a top 2021 rebound idea, to accumulate shares for the long-term.

Unmatched Positioning

Analysts frequently cite Sands’ balance sheet — $2.38 billion USD in cash at the end of Sept. 30 — as one reason to embrace the stock. That stockpile will grow if the company proceeds with selling the Venetian, Palazzo, and Sands Convention Center in Las Vegas, a transaction that could fetch up to $6 billion.

“The company’s impeccable balance sheet not only adds a level of safety and security to the story, it also favorably positions the company to successfully pursue any global integrated resort development opportunities of size that come along in the future, in our view,” adds Wieczynski.

The Stifel analyst adds there’s only limited near-term risks to LVS returning capital to shareholders, which include buybacks or perhaps restoring its previously suspended dividend.