Las Vegas Sands Earns ‘Conviction Buy’ Upgrade from Goldman Sachs

Posted on: January 17, 2022, 10:58h. 

Last updated on: January 17, 2022, 11:05h.

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

Citing easing regulatory risk in Macau, Goldman Sachs moves Las Vegas (NYSE:LVS) to the firm’s conviction buy list.

Las Vegas Sands
Las Vegas Sands’ Venetian Macau. Goldman Sachs places Sands stock on its conviction buy list. (Image: Macau Business)

Analyst Simon Cheung added Las Vegas Sands to his firm’s Americas Conviction List while adjusting his price target on the gaming stock to $66 from $67. Even with the modest downward alteration, the new forecast, which is around the 52-week high, implies 53.4 percent upside from the Jan. 14 close.

News of the Goldman upgrade sparked a rally in shares of Sands China (OTC:SCHYY), with that stock surging another 14 percent during Hong Kong’s Monday session — a strong follow-up to last Friday’s 20 percent gain. US markets are closed Monday in observance of the Martin Luther King, Jr. holiday.

When domestic equity exchanges open Tuesday, shares of Sands could be teed up for another big day, thanks to the Goldman commentary. Last Friday, the gaming stock surged 14.15 percent on volume that was more than six times the daily average, closing at its highest levels since last September. That’s after it became clear new gaming policy in Macau isn’t as stringent as previously feared.

Macau Clarity Just What LVS Needed

Investors hate uncertainty, and that’s exactly what was created last September by Macau authorities. Following the announcement of a new gaming consultation, shares of concessionaires in the world’s largest gaming hub endured a dramatic slide in which $20 billion in market value was erased in a single trading day.

However, the worst of those fears aren’t being realized, providing support for the upside thesis in LVS and other Macau operators. While license terms are being reduced to 10 years from 20 years, there’s an option for a three-year renewal at the end of the initial term.

Concessionaires must also boost minimum share capital to roughly $625 million from just $25 million, and a managing director that’s a permanent Macau resident must hold 15 percent of share capital, up from 10 percent. Analysts point to good news in the form of no material alterations to the current tax rate of 40 percent and no restrictions on dividends.

The good news out of Macau emerges at a time when some analysts are starting to favor Las Vegas Sands on the basis of valuation. They also cite the likelihood that the world’s largest casino market will show signs of improvement this year.

Focus Shifts to Travel Restrictions

LVS is the largest Macau operator, controlling five integrated resorts in the special administrative region (SAR). That confirms that removal of the regulatory overhang is a positive for investors.

Now, market participants are likely to shift their attention back to travel policy, which has stymied the Macau recovery since the onset of the coronavirus pandemic.

Owing to China’s zero-tolerance policy on COVID-19, the upcoming Chinese New Year — usually a marquee event for Macau operators — is expected to be subdued, as Beijing looks to keep COVID-19 cases to a minimum ahead of the Winter Olympics next month. Some analysts are speculating that travel controls will ease soon after the Olympics conclude on Feb. 20.