UKRAINE – 06/27/2021: This photo illustration shows a logo of the Las Vegas Sands Corporation … [+]
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[Updated 8/2/2021]
The shares of Las Vegas Sands (NYSE: LVS) have lost 20% in value since the announcement of the sale of their Vegas property in March. The reintroduction of restrictions in Guangdong weighs on the stock as the company is now heavily dependent on its Macau business. In 2019, LVS’s Macau properties contributed $ 8.8 billion out of $ 13.7 billion in total revenue and $ 3 billion out of $ 5.2 billion in total EBITDA. Thus, the development of Macau’s gaming business remains key to the long-term returns for Las Vegas Sands LVS stock. The company is also investing in digital gaming technologies for institutional clients to enter the online gaming industry and diversify its business portfolio. We highlight Sands’ historical trends in sales, profit and valuation multiplier in an interactive dashboard analysis. Review of Las Vegas Sands.
Sands’ performance in the first half of 2021 compared to last year
With pandemic travel restrictions in place in Macau and Singapore, Sands’ revenue in the first half of 2021 was down 66% from the first half of 2019, resulting in a net loss of $ 470 million. In particular, the company burned just $ 100 million in the first six months of 2021 compared to $ 956 million in the same period last year (H1 2020), largely due to significantly lower sales. For the full year of 2020, the company burned just $ 1.3 billion in operating activity, significantly less than the stock’s $ 18 billion drop in market cap from pre-pandemic levels. Therefore, we believe the stock is a good choice for long-term profits.
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Trefis
[Updated 06/09/2021] – When is the right time to get a look inside the Las Vegas Sands stock?
March, Las Vegas Sands (NYSE: LVS) announced the sale of the Venetian Las Vegas to pursue high growth opportunities in the US and abroad. With the reintroduction of restrictions in Guangdong, Macau’s casino business is likely to face headwinds from low tourist numbers in the short term. Sands has a strong presence in Macau, and the resumption of quarantine-free travel from mainland China is key to its recovery. However, casino expenses, which essentially include gambling taxes, make up around 50% of total expenses. As a result, the company recorded just $ 1.3 billion in operating cash flows despite a 74% decline in revenue last year. Given Sands ‘leadership in Macau’s mass market gaming business, the likelihood of entering the US sports betting industry, and Marina Bay Sands’ expansion, Trefis believes the stock is poised for long-term gains. We show the historical trends in sales, profit and share prices of LVS in an interactive dashboard. Las Vegas Sands stock is down 19% since 2017, largely due to adverse changes in sales
Comparison of financial metrics with MGM Resorts
In 2019, Las Vegas Sands and MGM Resorts reported total sales of $ 13.7 billion and $ 12.9 billion, respectively. Given the increased exposure to Macau, Sands’ sales in 2020 were down 74% (yoy) compared to 60% (yoy) at MGM Resorts in 2020. In particular, both companies have comparable long-term debt of approximately $ 13 billion on their balance sheet. While Sands is leaving the Las Vegas gaming market to explore better options, MGM Resorts has a strong presence in Las Vegas and other US regions.
Interestingly, MGM Resorts shares are trading 35% above pre-Covid levels, aided by the growing popularity of its sports betting application, while Las Vegas Sands stocks are nearly 20% below pre-Covid levels. Does this indicate a good buying opportunity in Las Vegas Sands? (Note: explained in our previous article below)
[Updated 03/18/2021] – Entry into Asian portfolios and sports betting can generate above-average returns
At the beginning of March, Las Vegas Sands (NYSE: LVS) took a historic step by announcing the sale of its Vegas property to Apollo Funds and VICI Properties for $ 6.25 billion. With multiple states legalizing sports betting, the company’s colleagues including MGM Resorts, Penn National Gaming PENN, and Wynn Resorts WYNN launched their sports betting applications in 2020. Sands’ has not announced its entry into the US sports betting and iGaming industries, but has a hidden presence with William Hills marquee on the Sands Venetian and Palazzo properties in Las Vegas. Given the uncertainty associated with the company’s decision to enter the sports betting industry or expand its Asian portfolio, Trefis is comparing profitability across all regions to highlight the stock’s strong upside as the company announces its investment plans in the near future . We believe the stock will have a sizable uptrend as new investments deliver returns on par with Singapore property. Our highlights of the interactive dashboard analysis The stock performance of Las Vegas Sands during the current crisis versus that during the 2008 recession.
Contribution of sands from different regions to sales and margins
In 2019, Sands’ properties in Macau, Singapore and Vegas contributed 63%, 22% and 15%, respectively, to revenue of $ 13.7 billion. More importantly, Vegas real estate had the lowest EBITDA margin at 26%, compared to 54% for Singapore and 36% for Macau. Therefore, investor returns will be largely driven by Sands’ operations in Macau and Singapore.
As the company reinvests the capital from its Vegas property sales in assets that can achieve a high EBITDA margin of 54% over the long term (like the Singapore property), shareholders will benefit from higher profitability and growing revenue – leading to long-term Capital Gains Leads.
What if Sands in Singapore allocates excess cash and reduces its debt burden?
In 2019, Sands announced the Marina Bay Sands (Singapore property) expansion plan with a target cost of $ 3.4 billion. The expansion project will increase the number of rooms by nearly 50%, with similar growth expected in other segments, including gaming, store rental, and food & beverage services. With higher capacity, Sands from Singapore can increase its EBITDA by 50%, resulting in an excess return on invested capital. As such, the stock has strong upside from current levels, provided the company’s new investments generate returns comparable to those of Marina Bay Sands.
In addition to a possible entry into the US sports betting and iGaming industry, the company is also looking for acquisition targets in Asia. Thus, the capital released opens up a wealth of opportunities for the company and likely gains for shareholders.
Do the colleagues at Las Vegas Sands offer better profits? Las Vegas Sands Stock Compare With Peers summarizes how LVS compares to peers on key metrics. For more useful comparisons, see Peer Comparisons.
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