Sands China Earnings: Renovation Continues to Disrupt Results, but Long-Term Strength Is Intact

Narrow-moat Sands China’s second-quarter performance was slightly below our and market expectations, owing to bigger-than-expected renovation disruption of its Londoner phase 2 project. Management expects the negative impacts of the renovation to peak in the third quarter, and in targeting to reopen the Venetian Arena and the Londoner Grand Casino in December 2024, and complete the whole project by second-half 2025. We think the ongoing disruptions, along with slower economic growth and sluggish consumer sentiment in China, will continue to weigh on Sands China’s near-term profit outlook. As such, we cut our fair value estimate to HKD 26.50 per share from HKD 27.30, after lowering our 2024-25 revenue forecasts by 5%-7% and adjusted EBITDA by 8%-10%. Our longer-term forecasts remain largely unchanged.