What Is Driving Our $64 Price Estimate For Las Vegas Sands?

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Las Vegas Sands

Las Vegas Sands (NYSE:LVS) reported $6.8 billion in gaming revenues from Macau in 2018, making it the largest concessionaire in Macau with a market share of 19%. The company’s stock gained 20% during the rally in 2018 and eventually also fell by a similar level this year, primarily due to investor concerns around the impact of the ongoing U.S.-China trade war.

Per Trefis estimates, Las Vegas Sands has a fundamental value of $64 per share. We recently lowered our price estimate from $78 to the current level of $64, and highlight the drivers of this stock and rationale behind lowering of our forecasts below. You can view our interactive dashboard on How Has Las Vegas Sands Fared In Recent Quarters, And What’s The Outlook For 2019? to observe the quarterly revenue trends and modify yearly forecasts to gauge the impact on the stock price. Additionally, you can find more Trefis Consumer Discretionary sector data here.

A Quick Look at Las Vegas Sands Revenue Sources

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Wynn reported $13.7 billion in Total Revenues for full-year 2018. This included five revenue streams:

  • Casino: $9.8 billion in FY2018 (72% of Total Revenues). This segment includes income from regulated gambling activities at the company’s properties. Macau and Singapore properties contribute 69% and 22% of the casino revenues, respectively.
  • Rooms: $1.7 billion in FY2018 (13% of Total Revenues). This segment includes income from visitors/tourists who take a lodge in the company’s properties. Macau, Las Vegas, and Singapore properties contribute 42%, 35%, and 23% of the room revenues, respectively.
  • Food and Beverage: $865 million in FY2018 (6% of Total Revenues). This segment includes income from restaurants at the company’s properties.
  • Mall: $690 million in FY2018 (5% of Total Revenues). This segment includes income retail stores at the company’s properties from rentals and retail sales.
  • Convention, Retail and Other: $622 million in FY2018 (5% of Total Revenues). This segment includes income from business conventions at the company’s properties.

Factors Behind Our Share Price Revision

  • The combined rolling chip volume (or VIP turnover) of Venetian Macau, Sands Cotai Central, and Parisian Macau dropped by 10% y-o-y in Q1. These three venues contributed 84% of the Sands’ casino revenues from Macau last year. The declines were largely attributed to Chinese foreign currency regulations and smoking restrictions earlier this year. Hence, for the full year, we expect the VIP turnover in Macau to drop by 20%, as Sands has the largest share with 5 properties in Macau.
  • The non-rolling chip volume and slot handle (or mass market volume) observed a moderate growth in Q1 despite an overall decline in gaming revenues in Macau. For the full year, we expect the mass market segment to grow at 8-10%. This segment will remain the key driver of revenue growth over coming years due to the increasing popularity of mass market games in China.
  • The three American concessionaires, Wynn Resorts, Las Vegas Sands, and MGM Resorts together have a 40% share of Macau’s gaming revenues. While we believe that the ongoing U.S.-China trade dispute is unlikely to affect the American companies too much in the near term, it could potentially hurt Macau’s popularity in the long run.

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