Las Vegas Sands Earnings: Macao and Singapore Recovery in Full Swing, With More To Come

We plan to lift our $52-per-share Las Vegas Sands LVS fair value estimate by a high-single-digit percentage, driven by stronger Macao (66% of 2019 EBITDA) profitability and demand in Singapore (34%). We see shares as slightly overvalued but think continued demand recovery in Macao and Singapore will serve as a catalyst for Sands’ shares during 2023.

Sands Macao’s sales reached 54% of 2019′s level in the first quarter, as market visitation jumped to 48% of prepandemic marks versus just 14% three months prior. Encouragingly, Sands’ base mass and premium mass table wins reached 62% and 58% of 2019′s levels, respectively. The strong rebound in higher-margin mass business, compared with lower-margin VIP play, drove Macao’s EBITDA margin to 31.1%. We don’t plan to materially change our forecast for Sands Macao’s sales to reach nearly 60% of 2019′s level in 2023, driven by further visitation gains, as capacity in air (39% of 2019′s level in the first quarter), ferry (25%), and hotel (69%) comes back online. We do expect to lift our 27.4% 2023 Macao EBITDA margin forecast to at least 30% as we think the company will be able to retain its profitability levels.

Meanwhile, Singapore is also seeing strong performance, with sales at 111% of 2019′s level and an EBITDA margin at 46.5%. We expect to increase our 2023 revenue growth forecast to around 25% from 10% prior and continue to see around mid-40% EBITDA margins.

In our view, our Sands Exemplary capital allocation rating is intact, as the company continues to invest in its attractive Macao and Singapore portfolio. Specifically, Sands has already laid out $3.6 billion into its new Londoner brand in Macao and room upgrades in Singapore over the past few years and plans to spend at least another $6 billion on its portfolio over the next several years. We believe this expenditure will support the company’s regulatory intangible asset, source of its narrow moat.