A Wall Street analyst heaped praise toward Las Vegas Sands and its business in Macau and investors seemed to take the advice.
Shares of Las Vegas Sands jumped more than 3 percent on the New York Stock Exchange after Deutsche Bank gaming analyst Carlo Santarelli said in a research note Sunday the “choppy top line trends in Macau” and “geopolitical headwinds” have messed with the company’s market valuation.
“We expect positive Macau gross gaming revenue comparisons in the near term and believe this cadence will alter what has been decidedly negative Macau sentiment,” Santarelli wrote. “Given bearish Macau sentiment which, in our view, has created an opportunistic entry point for medium to longer term-oriented investors, we are upgrading shares of Las Vegas Sands to Buy from Hold.”
The company’s shares closed at $58.08 Monday, up $1.89 or 3.36%. Las Vegas Sands shares have been as high $69.60 in the last 12 months. However, monthly revenue declines in Macau in five of the first eight months of 2019 – including August’s 8.6% dip, which was the market’s biggest percentage drop in 27 months.
The ongoing trade war with the U.S. has had a negative impact on the Chinese economy while continued protests in Hong Kong over an extradition bill proposed by the Special Administrative Region’s government has discouraged travel to Macau. Las Vegas Sands draws more than 65 percent of its quarterly revenues from Macau.
Santarelli placed a $70 per share price target on Las Vegas Sands.
“From a trading perspective, we believe Las Vegas Sands has largely priced in the primarily Macau based headwinds that have impacted the business,” Santarelli wrote. “In 2019, which has experienced ebbs and flows in sentiment, Macau fundamentals, and geopolitical turmoil and rhetoric, shares have traded in a fairly wide range between $51 and $69.
Santarelli’s assessment of Las Vegas Sands may have helped the stock prices of the two other Nevada-based gaming companies that operate in Macau. Wynn Resorts closed at $114.65 on the Nasdaq, up $3.21 or 2.88. MGM Resorts International was up 23 cents, or 0.82%, to close at $28.40 on the New York Stock Exchange.
Las Vegas Sands is spending $2 billion over the two years on renovating and enhancing its Macau properties, primarily on rebranding the Sands Cotai Central into The Londoner Macau, $1.35 billion London-themed resort.
In addition to creating The Londoner, the company is spending $400 million for the 370-suite St. Regis Tower Suites and $450 million for the 290-suite Four Seasons Tower Suites. Both are expected to be completed by the first quarter of 2020.
The Londoner project is being constructed in phases to create minimal disruption and is expected throughout 2020 and 2021.
In April, Las Vegas Sands said it would spend $3.3 billion on the Marina Bay Sands resort in Singapore, which will include a 15,000-seat arena, a 1,000-room hotel, and additional convention space. Expansion to the resort’s casino – one of two in the island nation – is not part of the project.
“We believe our target multiples reflect appropriate historically based multiples for Las Vegas assets at this stage of the cycle, while our Singapore and Macau multiples are based on the growth profiles and return characteristics of the respective markets,” Santarelli wrote.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
