Las Vegas Sands Earnings: Macau and Singapore Results Continue to Shine Amid Macro Uncertainty

Las Vegas Sands LVS shares popped 5% as both its Macao and Singapore assets continued to see a demand and profitability recovery in the third quarter. We plan to lift our $59 valuation around $1-$2 for time value and slightly higher-than-expected near-term Macao profits, leaving shares undervalued.

Despite macro pressures in China, Sands Macao third-quarter sales improved to 85% of 2019′s level from 76% in the second quarter and 54% in the first quarter. We plan to maintain our full-year Sands Macao 2023 forecast at 75% of prepandemic marks, with a nearly full recovery in 2024. Revenue was aided by visitation returning to 81% of 2019′s level, up from 63% a quarter ago. Barring a severe economic contraction, we think travel can improve further, as Macao/Hong Kong airlift is still only around two thirds of 2019′s level. EBITDA margins in the region are also expanding across the company’s five properties, resulting in a consolidated figure of 35.3% in the quarter (84% of 2019′s level) versus the 33% reported last quarter (71%). Here, the company is benefiting from a streamlined cost structure and favorable industrywide mix shift to mass gaming from VIP. We plan to lift our 2023 forecast to around 33.5%, from 32.7% previously.

We remain constructive on Macao’s long-term prospects, with 1.4 billion people in mainland China serviced by just six market licenses. We are encouraged that management continues to invest back into its Macao portfolio, with room and gaming renovations set to occur at its Sheraton tower within its newly branded Londoner resort through 2025. In our view, this stands to support its regulatory intangible advantage, the source of its narrow moat.

Singapore results were also strong, with third-quarter sales at 128% of prepandemic figures, which compares with 134% in the second quarter and 111% in the first quarter. Impressively, this strength is despite prudent room and casino floor renovations and flight capacity from China (just 77% of 2019′s level).