Las Vegas Sands (LVS) Last Update 8/25/21
Related: WYNN MGM H
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Las Vegas Sands
$51.70
Yours
Trefis Price
N/A
$40.45
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Las Vegas Sands Company

VALUATION HIGHLIGHTS

  1. Macau Gaming & Hotels (Macau Gaming, Macau Hotels) constitute 43% of the Trefis price estimate for Las Vegas Sands's stock.
  2. Singapore Gaming & Hotel (Singapore Gaming, Singapore Hotel) constitutes 39% of the Trefis price estimate for Las Vegas Sands's stock.
  3. Food, Convention, Retail and Others constitute 13% of the Trefis price estimate for Las Vegas Sands's stock.

WHAT HAS CHANGED?

Travel Demand Recovery

• After announcing the sale of its Vegas property, Las Vegas Sands has not detailed its long-term growth plans considering the company’s strong liquidity position subsequent to deal closure.

• The re-introduction of restriction measures in Guangdong has been weighing on the stock as the company now remains highly dependent on its Macau business.

• In 2019, LVS’ Macau properties contributed $8.8 billion of $13.7 billion in total revenues and $3 billion of $5.2 billion in total EBITDA. Thus, the trajectory of Macau’s gaming business remains key to long-term gains in Las Vegas Sands stock.

• Per recent press release, the company is investing in digital gaming technologies for institutional customers to foray into online gaming industry and diversify its business portfolio.

• Also, the company has no significant debt maturities until 2023.

• With ongoing vaccination and likelihood of revenge tourism, we expect Sands’ top line to observe growth during the second half of 2021.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of LVS that present opportunities for upside or downside to the current Trefis price estimate for LVS:

Macau VIP And Mass-Market Gaming

  • LVS Macau Rolling Chip Volume: LVS Macau VIP Rolling Chip Volume increased considerably in the recent past from $43 billion in 2007 to $178 billion in 2013. However, the figure declined to about $61.3 billion in 2016, led by the Macau government’s anti-graft measures and the slower economy. This figure jumped to $69.5 billion in 2017. This metric increased further in 2018 to $80.44 billion, as a result of solid growth across all of its Macau properties. Further, LVS’ Macau properties grew by 17% in GGR, outperforming the industry by nearly 300 basis points. We expect the LVS’ Macau Rolling Chip Volume to be around $135.4 billion by the end of our forecast period. If Macau Rolling Chip Volume grows at a higher rate and is north of $213 billion by the end of the forecast period, there could be around 6% upside potential to our estimate for LVS’s stock. In a bearish scenario, assuming that the Macau Casino industry continues to decline as seen in 2014 and 2015 and LVS’ Macau VIP Table Game Wagers remain rangebound around $78.7 billion by the end of the forecast period, there could be a downside of close to 4% to our estimate for LVS’ stock. We believe the increasing population of Chinese high net worth individuals (HNIs), infrastructure development(High-speed rail link and Hong Kong to Macau bridge), the enhancement of Macau International Airport and the ongoing transformation certain Cotai projects - The Londoner and The Four Seasons - to be the stimulating factors for future growth.
  • LVS Macau Non-Rolling Chip Drop: LVS Macau mass-market gaming chip drop increased from around $5 billion in 2007 to $21.1 billion in 2017. This further increased to $24 billion in 2018, driven by broad-based growth across all its Macau casinos. Trefis forecasts non-rolling chip drop to increase to over $44 billion by the end of our forecast period. If LVS Macau mass-market gaming chip drop grows at a higher pace driven by the growth in visitors from Mainland China and reaches to about $49.8 billion by the end of the forecast period, there could be a 6% upside potential to our estimate for LVS’ stock. In a bearish scenario, assuming that the Macau Casino industry starts witnessing slow growth and LVS’ Macau mass-market gaming chip drop reaches only $29.8 billion, there could be a downside of approximately 9% to our estimate for LVS’ stock.

For additional details, select a driver above or select a division from the interactive Trefis split for LVS at the top of the page.

BUSINESS SUMMARY

Las Vegas Sands (LVS) is a leading developer, owner, and operator of destination casino resorts. It presently operates in the U.S., Singapore, and Macau. It operates in Macau and Singapore through its two subsidiaries, Sands China Limited (SCL) and Marina Bay Sands Pte. Limited (MBS), respectively.

Las Vegas

The Venetian Las Vegas has 4,028 suites, approximately 240 table games, and 1,870 slot machines. It also offers a range of amenities for its guests, including a Paiza Club, which offers services and amenities to VIP customers such as luxurious suites, spa facilities, and private gaming rooms, a Canyon Ranch SpaClub operated by Canyon Ranch and a theater/entertainment complex. The Palazzo is a 50-floor luxury hotel tower with 3,064 suites and is directly connected to The Venetian Las Vegas and Sands Expo Center. Sands Expo Center is one of the largest overall trade show and convention facilities in the U.S. with approximately 1.2 million gross square feet of exhibit and meeting space.

Macau

The Sands Macao has approximately 220 table games and 870 slot machines. It also includes a 289 suite hotel tower, several restaurants, a spacious Plaza Club, a theater, and other services and amenities. The Venetian Macao includes approximately 374,000 square feet of gaming space and has approximately 710 table games and 1,540 slot machines. The resort has a 39-floor hotel tower with over 2,900 suites, approximately one million square feet of retail and dining offerings; a convention center and meeting room complex of approximately 1.2 million square feet and a 15,000 seat arena.

In August 2008, LVS opened the Four Seasons Macao. The Four Seasons Macao includes the Four Seasons Hotel Macao with 360 rooms and suites. The resort has 340 table games and 1,100 slot machines, 19 Paiza mansions, conference and banquet facilities, and retail space of approximately 242,000 square feet.

In April and September 2012, the company opened phases I and IIA, respectively, of Sands Cotai Central, which is part of our Cotai Strip development. Additionally, LVS opened phase IIB of Sands Cotai Central on January 28, 2013. Sands Cotai Central currently offers about 6,200-room integrated resort complex featuring rooms and suites under the internationally-recognized Sheraton, Conrad, and Holiday Inn brands. The property includes approximately 367,000 square feet of gaming space with approximately 430 table games and 1,410 slot machines, approximately 520,000 square feet of retail, entertainment and dining space, over 369,000 square feet of meeting facilities, and a multipurpose theater. The company is currently rebranding several of its integrated casinos - The Londoner Macau and St. Regis Tower Suites Macau.

In September 2016, LVS opened another resort in the Cotai strip, namely The Parisian. The resort has about 2,500 hotel rooms and operates with more than 340 tables and 1,100 slot machines. The Parisian is interconnected with all other LVS resorts in Macao internally, which gives it a competitive advantage over others. It was the second most visited casino in Macau in 2016 after the Venetian in just around four months of operations. It also contains nongambling attractions such as paintings, fountain shows, meeting room complex, and a 1,200 -seat theater. This is in line with LVS’s strategy of diversifying revenues from Macau to decrease risks.

In October 2017, Las Vegas Sands announced plans to renovate Sands Cotai Central with a London theme and rebrand it as The Londoner Macau, mainly due to below-par results at the property. This conversion is expected to be completed in phases throughout 2020 and 2021.

LVS expects to add approximately 370 luxury suites in the St. Regis Tower Suites Macau, and construction is being initiated. It will be phased to minimize disruption during the property’s peak periods. LVS expects the additional St. Regis Tower Suites Macao to be completed in 2020

Singapore

LVS opened Marina Bay Sands in April 2010. The integrated resort has 2,600 rooms, 160,000 square feet of gaming space with approximately 625 table games and 2,360 slot machines, 1.3 million square feet of convention and meeting space.

Pennsylvania

On May 22, 2009, LVS opened the casino component of Sands Bethlehem. The resort has 3,260 slot machines, 190 table games, and food and beverage offerings, as well as the parking garage and surface parking. The main competitors include prominent firms in the gaming and casino industry such as Wynn Resorts, MGM Resorts, Boyd Gaming, Harrah’s Entertainment, SJM, and Galaxy, among others.

SOURCES OF VALUE

We believe that Macau gaming operations are the primary source of value for Las Vegas Sands because:

Significantly Higher Volume Than Las Vegas Casinos

Macau offers significantly high gaming revenues as compared to the Las Vegas Strip. Macau gaming revenues are approximately five times higher than that of the Las Vegas Strip. In 2018, gaming revenues at Las vegas Strip were $7.24 billion as opposed to about $37.6 billion in Macau. This significant difference is due to the very high demand for gambling in Macau, which is also the only place in China where gambling is legal. A lot of tourists from nearby countries visit Macau for gambling. The casino business is primarily divided into two categories in Macau, VIP gaming, and mass-market gaming. Las Vegas Sands has established a critical mass in the region, and it is helping the casino giant attract more and more VIP players. Las Vegas Sands is further developing a new casino resort called The Parisian in the Cotai region. The new resort will further enhance LVS’ capacity in Macau and drive growth in the coming years.

Other factors that drive Las Vegas Sands’ value are its Singapore and U.S. operations.

Geographically diversified operations

LVS is a global casino resort operator with a presence in the U.S., Macau, and Singapore. We believe diversified operations ensure a stable revenue stream for the company. The recent economic recession in the U.S. did not affect LVS severely. Its Asian operations helped it to overcome the economic recession.

LVS and Resorts World Sentosa are the only integrated resort operators in Singapore. We believe the existence of duopoly in Singapore gaming industry offers enormous growth potential for the following reasons:

The region is not expected to witness intense competition, at least in the near future. Also, Singapore has a locational advantage. It has approximately 5 billion population residing within a 5-hour flight distance. Gaming taxes in Singapore are comparatively lower. VIP games are at 5% approximately and mass-market games at 15%. Singapore’s resident population is approximately 5.8 million, whereas Macau has approximately 632,000 people. The large resident population provides domestic revenue generation opportunities for the Singapore gaming industry.

Premium brand image

LVS is recognized worldwide as a premium brand resort. It has a sophisticated style and offers exquisite luxuries to its customers. It mainly caters to high-end gaming customers. LVS has a Paiza Club that offers high-end services and amenities to VIP customers, such as luxurious suites, spa facilities, and private gaming rooms. It also has a Canyon Ranch SpaClub operated by Canyon Ranch. Marina Bay Sands has been built at an approximate cost of $5.5 billion. The resort offers exquisite luxuries to its customers. It has seven celebrity restaurants and a 15-meter long rooftop swimming pool.

KEY TRENDS

Macau Showing Signs of Improvement

2015 was tough for all the casino operators in Macau, and it marked a 34% decline in gross gaming revenues. The primary reason for this drop is the government’s anti-corruption crackdown. A wave of high-profile arrests of senior Chinese officials has hurt the VIP business of Macau casinos as they preferred to maintain a low profile. Furthermore, the weakening economy added to the woes of casino operators in the region. Moreover, Beijing wants Macau to diversify its economy, largely dependent on gambling, which accounts for a significant portion of the local government revenues.

However, in 2016 the gaming industry improved in the second half of the year, taking the decline in yearly gross gaming revenues to just 3.3%. The last quarter witnessed double-digit growth in gross gaming revenues of the region. Macau continued its recovery throughout 2017 and 2018, with gaming revenues increasing approximately 19% and 14%, respectively. Further, the GGR in the region grew consistently for the 29th straight month in December 2018.

Increasing share of Asia casino revenue

LVS is focusing its efforts on Asia for future growth. In 2010, LVS opened the Marina Bay Sands in Singapore. The following factors strengthen the trend mentioned above:

Macau surpassed the Las Vegas Strip as the world’s biggest gambling hub in 2006 after the government allowed the entry of overseas casino operators. Since then, the region has witnessed unprecedented growth. In 2016, the region collected $28 billion in gaming revenues, far more than the gaming revenues collected on the Las Vegas Strip.

A strong Chinese economy followed by a burgeoning middle class and an increasing population of high net worth individuals is helping boost Macau’s growing gaming industry. Macau offers a world-class gaming infrastructure. All major gaming companies like Melco Crown, Las Vegas Sands, and MGM Resorts have a presence in Macau.

Japan legalized casinos in 2018, in order to generate higher revenues. The legislation allows the construction of three casino resorts, with no decision on specific locations yet. It is slated that the first casinos would likely open around the mid-2020s. According, Goldman Sachs estimates Japan’s casino market is expected to generate nearly $ 16 billion in gaming revenues if three resorts open. As a result, Japan could be the second-largest gaming market after Macau.

Las Vegas gaming market growth slowing down

The economic recession of 2008-2009 slowed down the growth of the Las Vegas gaming industry. Other factors mentioned below also accentuated the slow down:

Other U.S. states like Pennsylvania and Delaware have legalized table games. Similar actions by other states could affect the number of tourists visiting Las Vegas. More than 80% of the tourists visiting Las Vegas are domestic. The Las Vegas gaming market has reached a saturation state. Casino operators indulge in intense competition to sustain their margins. Intense competition is affecting the industry margins.

Excess room capacity hitting the markets is expected to pressurize the margins of the gaming industry by pushing average daily rates down. Furthermore, Asian tourists prefer Macau to Las Vegas as a result of two things: firstly, it offers world-class gaming infrastructure since the advent of foreign gaming companies in Macau in 2006, and secondly, it is at a nearby location. The decline in the number of Asian tourists would also affect the Las Vegas gaming industry.

Gaming revenues in Las Vegas has been fluctuating in recent past, casino revenues in 2018 declined slightly due to a fall in win %. Las Vegas reported a slight increase in tourist visitations in the first two months of 2019, and this trend is expected to continue in the near term. As a result of improving tourism in Las Vegas and the rising demand for gaming and leisure should continue to drive the industry in 2019.

Key infrastructural initiatives underway

The Macau government is reinforcing a series of initiatives in order to drive visitor growth in the region. The gaming industry is a key contributor to Macau’s GDP. The government is investing in new transportation links to ease travel for Chinese visitors. It should be noted that most of the tourists visiting Macau are from Mainland China.

The Guangzhou-Zhuhai high-speed railway is expected to improve travel time from Guangzhou to Macau to 40 mins, down from the 2+ hours taken by bus. The Macau Light Rapid Transit will link ferry terminals and key locations. It will have 12 stops on the Macau peninsula, 11 stops on Cotai and Taipa, and will fully integrate different regions within Macau.

Also, the Hong Kong-Zhuhai-Macau bridge, which opened in October 2018, will connect Hong Kong to Macau, thereby, reducing car travel time from 4 hours to 40 minutes and should drive greater Mass market visitations. The Macau International Airport is presently undergoing capacity upgrades. Its capacity will be increased to handle 10 million people per year from the current capacity of 7.8 million people. This project is expected to get underway in early 2019.