Las Vegas Sands Still the Best Option for Macau Recovery
Visitation to Macau is starting to increase, and the data on Gross Gaming Revenue (GGR) is also improving. This is good news following the negative impact of the coronavirus on the gaming industry. Analysts, however, are favoring a bullish move on Las Vegas Sands.
Shares of the Las Vegas Sands went up 6.22 percent last week. The revenue coming from the Chinese territory was reduced to $844 million (70.5 percent) in November. However, the reduction still produced better figures than what was obtained in October and the past months where the effects of the coronavirus were more pronounced. It has been a stretch of decline since the initial lockdown announcement in march, but things are starting to get better.
The recovery of Macau is being driven by mass-market players. Soon, this recovery of the world’s largest casino center could be capitalized on by the Las Vegas Sands.
Steven Wieczynski, a Stifel analyst, said, “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.”
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The “buy” rating is lower by about 13 percent compared to what it was this time last year. However, the “buy” is still favored as Las Vegas Sands has gathered momentum this past week. Over the past month, it has recorded a 20.44 percent increase.
The Las Vegas Sands operates five integrated resorts at where seems to be its largest market – Macau. As Macau bounces back, investors could be offered more upside by Las Vegas Sands. It could also lead to less tension between the US and China, one that might be ushered in with the Biden Administration. The Sands will be opening the Londoner Macau in February 2021. The launch of this facility has been long anticipated.
Steven said, “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.” Investors are, however, advised to take advantage of the current weakness of the Las Vegas Sands stock, which is anticipated to make a full comeback sometime in 2021.
A major reason put forward by analysts as to why the stock should be embraced now is the balance sheet made public by the company. At the end of September, it reported $2.38 billion in cash for the company. If Las Vegas Sands sells some of its resorts, like the Venetian, Palazzo, and the Las Vegas Sands Convention Center, it could fetch them up to $6 billion, thereby increasing the company’s stockpile.
Steven Wieczynski in his review, further stated that the size of the company’s balance sheet brings a level of safety. It reads, “The company’s impeccable balance sheet not only adds a level of safety to the story but it also favorably positions the company to successfully pursue any global integrated resort development opportunities of the size that come along in the future, in our view.”
He concluded by pointing out that buybacks or restoration of its previously suspended dividend are the only risks to Las Vegas Sands returning capital to shareholders.