J.P. Morgan senior analyst Joseph Greff lifted his Las Vegas Sands first-quarter estimates quite a bit, but his target price for the stock was only a modest increase, from $68 to $69 per share. The stock was trading at $58 at the time of his report.
For the first quarter of this year, Greff forecast that Macau casino revenue for Sands will be $974 million; his cash-flow estimate of $304 million compared favorably to a Wall Street consensus of $221 million in EBITDA.
“We continue to believe that LVS shares represent an appealing China re-opening play, given improving travel and spend trends since the market has become more accessible and current trends reflect pent-up demand that is not dissimilar to what U.S gaming and leisure travel markets experienced earlier in their respective recovery,” Greff continued.
Such confidence was despite Greff’s projections of Sands Chinese-derived business compared to pre-pandemic times (early 2019): mass-market play at 53 percent of pre-COVID levels and VIP trade only 15 percent of what it was before COVID and a governmental crackdown. Greff estimates Sands’ market share of its core mass-market custom to be 26 percent and its tranche of VIP play to be 10 percent of the overall market.
The analyst suggested that mass-market cash flow could be even better were hotel-room inventory not constrained by a labor shortage, many expatriate workers having decamped since 2020. “We have received many incoming calls from investors on what is likely (and in our view, temporary) lagging mass-share performance for LVS versus” Wynn Resorts, MGM Resorts International, and Melco Resorts & Entertainment, Greff reported.
“We don’t think this is a negative,” he continued, “(in fact, we think it’s likely lowering expectations and creating favorable positioning in the stock) given LVS’s historical higher market share in base mass (recovering less rapidly than the premium-mass segment) and less premium-mass-market share historically, but this is all mix related as the market’s recovery is being driven by the premium mass.” He predicted a change of dynamics over the summer, as the Macanese market becomes more balanced in terms of visitors “and more than just wealthy Chinese.”
Greff further forecast that Sands’ 2023 performance in Macau would be $4.8 billion in gross gaming revenue, plus $1.9 billion in cash flow. Looking ahead to 2024, he predicted $6.3 billion and $1.3 billion, respectively. He felt comfortable with his Singapore assumptions and stood pat on a prognostication of $397 million in first-quarter revenue, broadening to $1.6 billion over the full year and more than $1.7 billion next year.
“We also believe that [Singapore’s] Marina Bay Sands (still) has operating momentum and should benefit from an uplift in China-related inbound travel,” although the latter didn’t do much last year, Greff added.
