Macau mass-market gaming-revenue share will likely be the biggest element to the 2025 story for Las Vegas Sands, according to Deutsche Bank. The report recommended a Buy rating, citing potential development opportunities in New York, Texas, and Thailand.
“In 1977, Reggie Jackson referred to himself as ‘the straw that stirs the drink’ when discussing his importance to the Yankees,” said analyst Carlo Santarelli. “In 2025, we believe mass-market share in Macau will be the straw that stirs the drink for Sands’s share performance.”
In 2019, Sands enjoyed a 32.8% mass-market revenue share with just under $6.5 billion of mass-gaming revenue. In 2024, Santarelli expects Sands to generate roughly $6.2 billion of mass-gaming revenue, with mass share in the 28% to 29% range.
“We believe a recapture of some portion of the 400 to 500 basis points of lost share in 2025 relative to 2019 will go a long way in determining the prospects for Sands shares in 2025,” Santarelli said. “If we assume 5% mass market growth in 2025, every 100 basis points of incremental share for LVS would equate to $85 million of incremental EBITDA on the conservative side, assuming reinvestment rates remain similar (up to $125 million assuming diminishing incremental reinvestment and leverage on incremental gaming revenue).”
The drivers of share gains on the mass side in 2025 will include the return of the revamped room portfolio at The Londoner, easy comparisons stemming from construction activity in the casino at the Londoner, and the return of the Venetian Arena and the programming around it, Santarelli said.
Consensus forecasts a property EBITDA increase in Macau of $435 million in 2025 relative to 2024. While hotel-room revenue and high-margin non-gaming revenue are expected to be helped by the mass-share drivers, Santarelli believes the market is currently assuming that 150 to 250 basis points of incremental mass-share improvement will serve as the most significant driver of the growth in 2025.
“We believe a change from the negative revisions LVS has experienced in 2024 will be of paramount importance in 2025 and the mass-gaming segment will serve as the most important driver of this potential change in 2025.”
In 2019, Sands spent $1.65 billion on promotions and customer reinvestment. Over the third-quarter-last-12-month period, Sands has spent $1.41 billion on promotions and customer reinvestment, Santarelli said.
While promotional spend has been lower, so too has gaming revenue, which is down $1.85 billion over the last 12 months relative to 2019. When looking at the promotional and reinvestment environment relative to the pre-pandemic era, Deutsche accounts for the structural change in the VIP segment and acknowledges that the mix shift in gaming revenue from VIP to mass should have lessened promotions as a percentage of gaming revenue by 450 basis points, assuming equivalent historical segment reinvestment rates.
“The experience, however, has been far shy of these mix-driven promotional reduction levels, as promotions now represent 20.7% of gaming revenue relative to 19% in 2019,” Santarelli said. “While the competitive nature of the market has undoubtedly changed with mass becoming a more intense promotional battleground focus for all, that makes it unlikely Sands can achieve the mix implied reinvestment rate of 14.5%. We do believe there is considerable upside potential here for LVS as gaming revenue growth leverages the promotional spend and flows through to EBITDAR at a considerably higher level than the experience to date.”
By mid-2025, Sands should complete Phase II of the Londoner project at $1.2 billion and Marina Bay Sands Phase II in Singapore for $750 million. Large-scale investments in existing assets will cease for the time being and Sands “should begin to harvest the fruits of these upgrades,” Santarelli said.
“While IR-2 in Singapore has drawn plenty of interest of late, the reality is that the project, with a 2031 projected opening, is too far off for us to believe it will garner any attention in the valuation over the coming years. We do believe other potential pipeline scenarios could serve as a catalyst for shares with 2025 serving as a pretty meaningful year for unlocking what could be a robust longer-term development story for LVS.”
Given its stature within the industry as well as the balance sheet, Santarelli expects Sands to be perceived favorites in any greenfield environment, Santarelli said. Deutsche Bank expects 2025 will shape Thailand’s development pipeline, with regulations due by the end of the year. New York’s license applications are expected in the second quarter and Texas has a possible referendum on the ballot in November.
“Given the now-stable growth trajectory and limited reads into the Singapore market, Macau tends to drive the sentiment engine for LVS with Marina Bay Sands, which has been showing a healthy growth trajectory largely on autopilot for the investment community,” Santarelli said. “We expect more of the same in 2025. Our view is shaped from mass gaming growing mid-single digits in the second and third quarters of 2024 and hotel room revenue getting a boost from the new room and suite product coming online in the second quarter of 2025. One thing is worth noting as it relates to the 2025 adjusted EBITDA cadence. While the third quarter of 2024 was a punitive VIP hold period for Sands, the first half of 2024 was favorable, with hold adjusted EBITDA over the first half of 2024 coming in $141 million better than hold normalized EBITDA, thereby creating challenging headline comparisons for the first half of 2025.”
Year-to-date post the unlucky third quarter of 2024 hold adjusted EBITDA is $63 million lower than reported EBITDA, and a 3% headwind exists from an optical growth perspective in 2025 assuming normal hold remains static at 3.3%.
Deutsche Bank gives Sands a $60 price target after trading around $50 to close 2024. That target is based on “a sum-of-the-parts approach,” in which Santarelli applied property-level multiples to estimated 2025 property-level cash flow to establish a firm value.
“We then extract the proportionate share of estimated year-end 2025 net debt adjusted for construction in progress allocated to LVS. Our price target is based on a blended multiple of 12.9x our 2025 EBITDA estimate for LVS’s wholly-owned portfolio and royalty fees associated with Sands China and multiple of 11.5x our 2025 EBITDA estimate for LVS’s Macau assets, of which 71% is attributable to LVS.”
This analysis generates an equity value of $36 for Marina Bay Sands and royalty fees from Sands China. They value the 71% interest in Sand’s Macau operations at $24 per share.
“We believe our target multiples reflect what we deem to be reasonable multiples, relative to history and adjusted for market growth and reinvestment levels.”
