Singapore Strength And Macau Rebound Drive Las Vegas Sands Q1. What’s Next For The Stock?

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Las Vegas Sands (NYSE:LVS) posted a better-than-expected set of Q1 2023 results last week led by a strong performance of the company’s Singapore business and a rebound in activity in Macau. While adjusted earnings stood at $0.28 per share, compared to a loss a year ago, revenues came in at $2.12 billion, marking a 124% jump from last year.

Las Vegas Sands’ Macau business – which accounted for over 60% of the company’s pre-pandemic revenue – is seeing a strong rebound as China relaxed many of its intense Covid-19 restrictions in early January. While Macau revenues trended to a fraction of 2019 levels amid a dramatic decline in tourist inflows in 2021 and 2022, LVS appears to be seeing strong pent-up demand currently.  The company said that Macao property portfolio mass gaming revenues have reached the $1 billion mark for the first time since 2019, approaching about 62% of the Q1 2019 levels. Adjusted property EBITDA stood at about $398 million, about 46% of 2019 levels.

Las Vegas Sands’ Marina Bay Sands (MBS) property in Singapore remains the company’s biggest profit driver, as tourist inflow into the country also continues to expand. Inflows into Changi Airport stood at almost 78% of 2019 levels in the month of February, up from around 14% in February 2022. Adjusted property EBITDA stood at $412 million, up over 3x versus last year, and about 95% of 2019 levels. Occupancy rates for hotel rooms were also robust standing at over 97%, with average daily rates surging 130% to $594.

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So what’s the outlook like for LVS stock? We expect the company’s financial performance to continue to improve going forward as demand in Macau picks up further. Overall visitors to Macau reached about 5 million over the first quarter, about 48% of pre-pandemic levels. We should see a considerable recovery in the coming quarters as airline capacity to the region improves. The company is well-positioned to cater to this demand given that has over 12,000 rooms in the region. Moreover, coming in from a downturn, the company’s cost base is also likely to be more streamlined and this is likely to help profitability. Things are likely to remain strong in Singapore as well, given the country’s reputation as a stable and high-value market.  Las Vegas Sands’ liquidity position is also reasonable, with cash holdings standing at $6.5 billion as of March 2023. That being said, there are risks as well.  LVS is also quite highly leveraged, with close to $16 billion in total debt outstanding. We value LVS stock at about $60 per share, which is roughly in line with the current market price. See our analysis of Las Vegas Sands valuation for more details on what is driving our price estimate for the stock.

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 Returns Apr 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 LVS Return 10% 31% 18%
 S&P 500 Return 1% 8% 85%
 Trefis Multi-Strategy Portfolio 2% 10% 246%

[1] Month-to-date and year-to-date as of 4/24/2023
[2] Cumulative total returns since the end of 2016

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