Citing better-than-expected performance following China’s Golden Week holiday period and ahead of June gambling-revenue reports, J.P. Morgan analyst Joseph Greff raised his cash-flow projection for Macau-centric Las Vegas Sands. He also added $1 to his price target on the stock, bringing it up to $72 per share.
Greff noted “improved quarter-to-date trends, which have largely outperformed our (and we think investor) expectations during a historically seasonal weak period.” Worries of such seasonal weakness were “de-risked” by steady casino intake during the first 18 days of June and the month is projected to end even with May’s $1.94 billion in casino revenue.
That would bring Macanese casino revenue for this year to 65 percent of pre-pandemic altitudes and 85 percent of pre-COVID mass-market play, as mass players continue to return more speedily than VIPs. In the second quarter, Greff predicts, Sands will derive $548 million in cash flow from Macau, predicated on a 25 percent market share and non-gambling revenues equal to eight percent of gross gaming revenue.
Although June isn’t fully in the books, Greff sees no prospect of a downturn, especially with concerts by Jacky Cheung, “a noteworthy celebrity,” at Cotai Arena every weekend through July 2.
As for June’s month-to-month flatness, Greff sees this as a positive, since “the long-term monthly sequential change from May into June averaged a 14% decline” every year except COVID-kiboshed 2020.
Greff continued, “Maintaining May’s absolute [gross gaming revenue] level into June (no sequential decline) is indicative of improving GGR and, importantly, visitation trends, which typically drive base mass volumes. With the summer period historically strong for visitation and base mass, we expect [Sands] to benefit the most.” What’s more, he expects the continued rollout of The Londoner to enlarge Sands’ share of the premium-mass player base.
The analyst concluded by saying that Sands is “a buying opportunity for investors willing to ignore the noise and focus on the GGR recovery and what we think will be a positive estimate revision story (for LVS and its Macau peers).”
