LVS: Singapore And Macau Performance Will Balance Ongoing Market Uncertainties

Key Takeaways

• The Londoner Macao's full opening leverages scale and quality, boosting revenues and cash flow in a competitive market.
  
• Strategic share repurchases aim to drive EPS growth and return value to shareholders, enhancing long-term growth prospects.
  
• Challenges in the Macao market and strategic limitations, along with intensified competition, could hinder Las Vegas Sands' revenue and profitability growth.

Catalysts

Owns, develops, and operates integrated resorts in Macao and Singapore.

• The full opening and ramp-up of The Londoner in Macao, with its 2,405 rooms and suites, is expected to boost revenues and cash flows significantly as the property leverages its scale and quality in a competitive market.
  
• Marina Bay Sands (MBS) in Singapore reported record EBITDA from high-value tourism and is expected to continue its growth trajectory supported by increased visitor capacity post-renovations, directly impacting revenue and EBITDA growth.
  
• There is room for continued improvement and growth in EBITDA at both Macao and MBS due to ongoing innovations in gameplay, particularly with side bets in baccarat, which are expected to enhance hold percentages and revenues.
  
• The strategic focus on share repurchases, including an increase in the buyback authorization to $2 billion, is intended to deliver accretive earnings per share (EPS) growth and return value to shareholders over time.
  
• Continued reinvestment in Macao assets and the anticipation of non-gaming investments aligning with governmental expectations suggests sustained long-term growth prospects, potentially improving both revenue and net margins.

Las Vegas Sands Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Las Vegas Sands's revenue will grow by 6.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.2% today to 17.7% in 3 years time.
• Analysts expect earnings to reach $2.5 billion (and earnings per share of $3.89) by about September 2028, up from $1.4 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $2.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.3x on those 2028 earnings, down from 26.3x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
• Analysts expect the number of shares outstanding to decline by 5.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.61%, as per the Simply Wall St company report.

Las Vegas Sands Future Earnings Per Share Growth

Risks

• The Macao market has not grown as anticipated, presenting challenges for revenue and cash flow despite strong assets. [Revenue]
  
• Macao EBITDA margins were down due to lower-than-expected hold in certain segments, indicating pressure on profitability. [Net Margins]
  
• The decision to not pursue the New York casino license due to concerns about potential iGaming legalization suggests limits on strategic expansion opportunities. [Earnings]
  
• Non-Guangdong visitation to Macao is still recovering at only about 75%, which could limit growth prospects in high-spending customer segments. [Revenue]
  
• Increased competition in the premium mass segment in Macao could pressure market share, potentially affecting revenue and profitability. [Revenue and Net Margins]

Valuation

• The analysts have a consensus price target of $59.9 for Las Vegas Sands based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $73.5, and the most bearish reporting a price target of just $50.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $14.1 billion, earnings will come to $2.5 billion, and it would be trading on a PE ratio of 18.3x, assuming you use a discount rate of 9.6%.
• Given the current share price of $54.0, the analyst price target of $59.9 is 9.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.