BRAZIL – 02/15/2020: In this photo illustration, the Las Vegas Sands Corp website is displayed on one … [+]
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The proposed amendment to Macau’s Gambling Act and increased regulatory oversight, coupled with the ongoing slump due to the coronavirus crisis, have resulted in a 50% decrease Las Vegas Sands shares (NYSE: LVS). Notably, Sands’ current market cap of $ 27 billion is slightly more than Draft kings“(NASDAQ: DKNG) $ 20 billion. While the US sports betting and iGaming industries are likely to top $ 40 billion by the due date, Flutter Entertainment’s 40% FanDuel market share makes Draft Kings the second choice for gamers. Additionally, several sports betting applications, including bet365, HardRock Café, BetMGM, Barstool, and William Hill, indicate high levels of competitive rivalry in the emerging industry. Given the higher profitability of Las Vegas Sands, the significant decline in market cap, and effective cost control measures taken during the pandemic, Trefis believes it is a better choice over Draft Kings. We compare a number of factors such as historical sales growth, returns and valuation multiples in an interactive dashboard analysis, Las Vegas Sands vs. Draft Kings: Industry colleagues; Which stock is better? (tied together: Amid the sports betting frenzy, are you looking at Las Vegas Sands over Draft Kings?)
1. Sales growth
Draft Kings ‘growth has been much faster than Las Vegas Sands’ growth over the past two years, with DKNG’s revenue rising at a rate of more than 50% per year from $ 226 million in 2018 to $ 614 million increased in 2020 Sales from Las Vegas Sands at an average rate of 4% per annum from $ 12.7 billion in 2017 to $ 13.7 billion in 2019, which then decreased by 73% to $ 3.6 billion in 2020. In March, Sands announced the sale of its Vegas property, which accounts for nearly 15%. of total sales.
- Before the pandemic, Sands’ properties in Macau, Vegas and Singapore accounted for 63%, 15% and 22% of total sales, respectively. The company’s Macau business saw strong growth, aided by new property openings, mass market bets, and a surge in tourist influx. With property closings having a financial impact, Sands completely shifted its focus to its Asian properties and announced the sale of its Vegas property in the first quarter.
- However, the proposed changes to the Macau Gambling Act to include increased oversight of dividend payouts are a headwind for Sands given its long-term growth plans related to Asia and Macau in particular.
- The online gaming, gaming software and other segments of Draft Kings contribute 84%, 12% and 4% respectively to total sales. Over the past two years, the average monthly unique player and average revenue per monthly unique player have increased 47% and 65%, respectively, resulting in strong revenue growth.
- While the conventional casino industry saw a decline from restriction measures and temporary bans during the pandemic, online casino Draft Kings reported strong growth numbers.
- According to an analyst presentation, when due, Draft Kings expects to account for 20-30% of the $ 21 billion sports betting market and 10-20% of the $ 18 billion iGaming market. Thus, the company’s revenue could reach nearly $ 5 billion in the long run.
YTD returns
Trefis
2. Returns (profits)
As a three decades old company and a leading integrated resort operator, Sands is an established brand with a consistent capital repayment policy. The company’s net income margin of 20% was key to regular dividend payouts. On the contrary, Draft Kings is currently on a growth path, with the expansion of sales and the capture of market share as the main focus areas.
- In 2019, Sands reported net sales of $ 13.7 billion and operating cash flow of $ 3 billion – an operating cash flow margin of 22%. In addition, the company returned $ 3 billion to shareholders in dividends.
- Draft Kings reported sales of $ 614 million and a net loss of $ 844 million in 2020. The company burned $ 338 million in working capital and raised capital from stock issues.
3. Risk
According to the latest filings, Sands reported $ 14 billion in long-term debt, $ 3 billion in equity, and $ 20 billion in total assets. In contrast, Draft Kings has no long-term debt on its balance sheet. Instead, DKNG reported $ 2.2 billion in equity and $ 4.4 billion in total assets, including $ 2.6 billion in cash and $ 1.1 billion in intangible assets and goodwill.
- Despite a sustained slump due to the coronavirus crisis, Sands has not made any significant write-downs. In addition, the company’s cost control measures limited operating cash usage to just $ 1.3 billion in 2020 and $ 105 million in the first half of 2021.
- As such, Sands’ $ 12 billion in property, plant and equipment on the balance sheet should deliver strong returns as business in Macau and Singapore normalizes. As highlighted in our previous article, Should you be betting on Las Vegas Sands stock following the historic announcement?, Sands’ properties in Singapore and Macau achieved EBITDA margins of 54% and 36%, respectively.
- Draft Kings’ balance sheet includes more cash and intangible assets. Thus, the current market capitalization of the share is linked to expectations regarding long-term sales growth and profitability.
- Given Sands’ strong cost control, low cash burn rate, and high historical investment returns, it seems like a safer bet over Draft Kings.
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