Behind The Numbers – Las Vegas Sands (LVS)
Casino operator Las Vegas Sands (LVS) finished today lower by 4.6% following its Q4 earnings after the close yesterday. Headline numbers were:
-EPS of ($0.22) vs ($0.25) estimate – Beat
-Revenue of $1.01B vs $1.05B estimate- Miss
-Macau Property Level GGR came in at $521M, an increase of 6% Q/Q
-Macau Property EBITDA totaled $74M vs $47M Last Year
-Marina Bay Sands Total GGR came in at $299M, an increase of 58% Q/Q
-Marina Bay Sands Property EBITDA totaled $177M compared to $144M Last Year
-Ended Q4 with $1.87B cash on hand and $12.93B of net debt, not including proceeds from the pending $6.25B sale of the company’s Las Vegas operations which is expected to close in Q1 of this year.
In his prepared remarks, CEO Rob Goldstein would inform investors that travel restrictions continue to affect visitation and their financial results in Macau and Singapore. Thankfully, during the quarter, Singapore saw an expansion of the Vaccinated Travel Lane (VTL) program, which helped drive meaningful sequential improvements to revenue and EBITDA. These VTLs were established with the Marina Bay Sands’ critical source markets of South Korea, Indonesia, and Malaysia and other nearby countries. Unfortunately, as JPMorgan pointed out in their post-earnings note, new ticket sales for VTLs were suspended in late December and are still suspended.
The next catalysts for Las Vegas Sands will be monthly Macau GGR numbers, which will be released early next week. Then, we get to see how travel fares during the upcoming Lunar New Year and Winter Olympics. Therefore, are we starting to see light at the end of the tunnel? Stifel analyst Steven Wieczynski highlights that investor appetite for Macau-centric names remains extremely low. While last week’s concession renewal process finally has some clarity around it, from here, they believe investors will now want to witness the Macau market actually stabilize and start to show growth for an extended period of time before revisiting these names. “The problem that exists is that the exact timing of knowing when that will take place is impossible to predict.” They argue that with such as massive cash infusion just months away and an investment grade balance sheet behind them, they believe it’s time for them to get aggressive buying back their stock and make a bold statement to the investment community.
Property Updates
Per JPMorgan analyst Joseph Greff, Las Vegas Sands is moving forward with its CAPEX plans in Macau and Singapore. Recall, in Macau, the company plans to spend $1.35B transforming Sands Cotai Central to The Londoner ($225M left to be spent). At Marina Bay Sands, recall in April 2019, the company announced its investment of $3.3B to build a 1,000 room hotel, state-of-the-art arena, and additional MICE space. Completion is expected in 2025 and of the $3.3B, $1B has already been invested. Additionally, there was a newly announced $1B renovation spend on the Marina Bay Sands towers for the addition of suites (none spent in the quarter, estimated completion in 2023).
Future Investments
Following a question on future investments from Morgan Stanley analyst Thomas Allen, CEO Rob Goldstein would cover specific areas:
As it relates to New York, he said that the recent announcement by Governor Hochul about three licenses is encouraging. “We are in the hunt. I wouldn’t want to overplay our hand, so we have — what opportunity it might be. But it’s a massive market underserved by the current product and by any metric that should be a massive market for us. So we are deep into it. We were there last week. We have a team on the ground working through it and we are hoping to get a license. That’s all I will say about that.”
Meanwhile, in the state of Florida, they are in a signature gathering mode. “It’s a struggle down there. It’s not an easy process to go through. But we are trying very much to be in the hunt in Florida. We really appreciate how underserved that market is and the material opportunities exist for a top-tier land-based opportunity in Florida would be wonderful.”
That same attitude was expressed for Texas. “We have been down there. We have spent time in the market. We have people trying to find our place in that market if it does happen, but I think that’s probably the farthest away from the decision.”
And lastly, management commented on the recent Wynn Resorts (WYNN) partnership in the United Arab Emirates. They also realized that it is a tremendous tourism market with a lot of potential. “So in terms of opportunity, we all understood why there would be interest there for them to go. So it’s something that we will continue to watch and look at.”
Online Betting
Finally, during the Q&A, UBS analyst Robin Farley would ask management if they were evaluating online gaming and sports betting options.
Management admitted that they have always been interested in digital, and believe there will be a day when sports betting and online gaming are very successful businesses. But they said they will wait patiently. “It hasn’t been a bad idea to wait for the last six months to eight months to see how this shakes out and there’s done a lot of blood spill.”
Stifel, in their post-earnings note, certainly agrees with that sentiment. However, they took it a step further by saying that what they don’t want to see happen is the company make a late-stage Hail Mary attempt to enter the crowded interactive/sports betting arena. “At this point we don’t even believe they would get credit for such an investment given they would probably be overpaying for an opportunity that comes with an excessive amount of risk.”
