In a note to clients, Stifel analyst Steven Wieczynski reiterates a “buy” rating on LVS, but lowers his price target on the name to $60 from $64. The newly lowered forecast still implies upside of about 20 percent from where the stock currently trades. LVS stock is up almost nine percent over the past week, a period including the Wednesday earnings report.
The operator noted it turned a surprise profit at the Marina Bay Sands (MBS) in Singapore during the September quarter, giving rise to a rally in the shares. Singapore is the company’s second-largest market after Macau.
At this point, investor expectations around Macau remain muted, and we expect consensus near-term estimates to move sharply lower to account for a more prolonged recovery in Macau/Singapore,” said Wieczynski. “This, in turn, should allow investors to get more comfortable with Macau-centric names, as they won’t have to endure multiple negative estimate reductions moving forward.”
The analyst points out that if investors can get comfortable with the idea that the worst is behind Macau, a process that could be sped along by the October and November GGR updates, “new money could emerge sooner than later.”
Macau Recovering Slowly
LVS runs five integrated resorts in the special administrative region (SAR). It is the largest operator in the region. All concessionaires in the Chinese territory are being hindered by a sluggish tourist visa approval process and coronavirus testing requirements. But there are signs of life.
On its post-earnings conference call with analysts, Sands said it’s breaking even on an earnings before interest, taxes, depreciation and amortization (EBITDA) basis this month, adding that premium mass patronage is strong in October.
Beijing “is trying to be as conservative as possible around COVID practices, which is a negative in the near-term for visitation/spending trends. But ultimately, that should be a positive long-term, as they get COVID under control and the country returns to normal sooner than other parts of the world,” said Wieczynski.
The analyst adds the EBITDA improvement to start this month “should be another sign to investors that the bottom is near.”
Bull Thesis Remains
In Singapore, the government is working on travel bubbles with nearby countries, which could lead to substantial visitation increases, in turn sparking upticks in spending at MBS.바카라사이트
Overall, Sands is grappling with travel issues in its two marquee markets. But that’s factored into the stock at this point, and it’s reasonable for long-term investors to be encouraged by the operator’s potential.
“To put it simply, we expect the company’s dominant position in the world’s most prolific gaming market (Macau), returns-focused management team, and superior balance sheet quality to produce sustainable outsized shareholder returns over the longer term,” Wieczynski said.