Is The Recent Rally In Las Vegas Sands’ Stock Justified?

by Trefis Team
Las Vegas Sands
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Shares of Las Vegas Sands (NYSE: LVS) have gained more than 15% since last November, primarily due to the Chinese government’s diversification plan for Macau into a financial hub, the lifting of daily remittance limit, and an easing in trade tensions between the U.S. and China. Trefis estimates Las Vegas Sands’ valuation to be around $70 per share, which is fairly in-line with the current market price.

As we had detailed in our article, What’s Ailing Las Vegas Sands’ Casino Revenues?, Sands’ generates a bulk of its casino revenues from Mass Market Gaming operations in Macau, which has been observing a strong growth of 20% (y-o-y) even as VIP Gaming observed steep declines. Though a slew of regulatory measures on Macau’s junket business and the ongoing protests in Hong Kong have been a drag on Macau’s casino industry over 2019, we believe Las Vegas Sands’ dominant position in the Mass Market Gaming segment justifies its current valuation.


A Quick Look at Las Vegas Sands Revenues

Las Vegas Sands reported $13.7 billion in Total Revenues for full-year 2018. This included five divisions:

  • Casino: $9.8 billion in FY2018 (72% of Total Revenues). It 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). It includes income from visitors/tourists who 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). It includes income from restaurants at the company’s properties.
  • Mall: $690 million in FY2018 (5% of Total Revenues). It includes rental income from retail stores at the company’s properties.
  • Convention, Retail and Other: $622 million in FY2018 (5% of Total Revenues). It includes income from business conventions at the company’s properties.


Higher Remittance Limit To Further Boost Mass Market Gaming Revenues

  • In 2019, Macau’s GGR declined by 3.4% (y-o-y) as reported by the city’s regulator (DICJ).
  • While the split between Mass and VIP Gaming is yet to be released, considering quarterly trends until September, the Mass Market segment very likely mitigated the impact of declines in the VIP segment – something we highlighted in a separate interactive dashboard about trends in the Macau Gaming Market.
  • The Mass Market segment has benefited over recent quarters due to the growing number of visitors and a stable hotel occupancy rate in Macau.
  • A higher remittance limit would enhance per capita spend and further boost Mass Market Gaming Revenues.


Las Vegas Sands Commands A 45% Share Of Macau’s Mass Market Gaming

  • In 2018, Macau’s Mass Baccarat GGR was approximately $12 billion.
  • Las Vegas Sands’ Mass Baccarat Drop was $24 billion, which roughly translates to a casino win (revenues) of $5.4 billion (= 24 billion x 22% (casino win percentage)).
  • Gross Gaming Revenue (GGR) is the amount earned by casino operators after paying wins to the players.
  • Las Vegas Sands’ market share of Macau’s Mass Market Gaming is nearly 45% (= $5.4 billion/$12 billion).

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