Deutsche Bank analyst Carlo Santarelli adjusted his fourth-quarter projections for Las Vegas Sands’s performance in Macau. He took his property-level estimate of cash down from US$678 million, including $5 million from Sands’s jetfoil ferry business to Hong Kong, to $611 million.
The revision was prompted, in part, by weak market share in November. Sands normally, per Santarelli, enjoys 25.5 percent of the Macanese gambling market. Also dampening the outlook were heavier promotional offers, discounts, and commissions to junket operators for bringing in VIP play. These were equivalent to 19 percent of Sands’s gross gaming revenue.
“While 4Q23 performance is sure to be a focus for investors when LVS reports, which we expect to be mid-next week, presumably post-close on 1/24/24, there are several other aspects of the print that we think are likely to resonate,” Santarelli predicted.
Those aspects included stock repurchases, including buying back $250 million of Dr. Miriam Adelson’s shares, as well as a significant buyback of Sands China stock. An updated budget also represented an overhang, with Santarelli expecting the budget for Marina Bay Sands’s expansion to top $4 billion. That represents a 33 percent cost overrun, partly occasioned by the likelihood of additional casino space, not part of the original plan or budget.
Santarelli also hoped for additional transparency on the impact and timing of business disruptions at Sands’s The Londoner in Macau. The latter’s renovation of hotel rooms and repositioning of its Pacifica Casino are presently anticipated to be completed by Chinese New Year of 2025.
The Deutsche Bank analyst nonetheless bumped his share-price target up a dollar, to $66 a share. Sticking with a “Buy” rating, he wrote, “We remain firm in our view of the favorable risk-reward in LVS shares at current levels and we believe continued strength and sequential growth in Macau, as well as the differentiation of the Macau gaming environment, relative to US gaming markets, will drive share outperformance in 2024.”
