2024-05-31 05:52:19 ET
Summary
- Recent trends in visitation in Macao and Singapore support the view that Las Vegas Sands will benefit from the rebound underway.
- LVS' debt and capital expenditures are in line, and their business has already seen margins expand.
- LVS stock offers the investor a discounted entry into a shareholder-oriented business that has exposure to a region of the world that has seen disposable incomes grow meaningfully.
Introduction and Previous Coverage
Our first article on Las Vegas Sands ( LVS ) was on June 3 rd 2021. At a price of $57.21, which was 19x normalized earnings, we argued that LVS is trading about where it would be in a regular, non-pandemic year. Much of the world was under lockdown, and LVS had stopped paying dividends the year before. In addition, there was the looming expiration on June 26 th 2022 of the subconcession agreement with Macao gaming authorities. The terms of the new agreement had not been finalized, and there was some opacity with what could be expected. These and other points were raised to question the validity of the quoted price, and we issued a sell recommendation.
Our second analysis of LVS was published on May 14 th 2022. At that time, the shares exchanged hands at $33.92, and we felt that the price was unduly pessimistic. While visitation in Macao in Q1 2022 was only 18% of what it was in 2019 and Singapore visitation for the first two months of 2022 was 96% below versus the comparable period in 2019, we felt that the market is not giving credit to LVS for having the balance sheet strength to weather the storm. They had just sold their assets in Las Vegas which gave them flexibility. In addition, the subconcession agreement had been extended and the Macao Legislative Authority published a draft that reduced some uncertainty around the terms of the renewal of the agreement. We argued that, at the current price, there was enough margin of safety to consider the stock a worthwhile investment. In particular, we demonstrated that using the price to sales ratio, LVS was trading at a price that ignored the value of gaming assets in Singapore....
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Las Vegas Sands: Now Is A Good Time To Get In