Las Vegas Sands Has Industry-Leading Liquidity Position

Las Vegas Sands LVS first-quarter update supports both our stance that the Macau (59% of 2019 EBITDA) gaming market is positioned for a full recovery post coronavirus containment and our view that the company holds an industry-leading liquidity position. Encouragingly, Sands strong balance sheet allows it to continue key investments in Macau and Singapore, which will support its regulatory advantage (source of its narrow moat). We don’t plan to materially change our $65 fair value estimate and see shares as attractive.

Sands mentioned several times throughout its earnings call that it expects Macau gaming demand to return quickly once quarantine and visa restrictions are lifted, which the company thinks could begin in late May and continue in phases through the summer. Sands’ view is based on conversations with its customers and on the historical context that Asian demand for gaming has returned quickly after prior health crisis’s (SARS and swine flu). In the company’s determination, the Asians’ familiarity with disease outbreaks will allow both the Macau and Singapore (31% of 2019 EBTDA) gaming markets to recover more quickly than the Las Vegas (10%) market in the U.S., although Sands noted solid group booking trends for Vegas in late 2020 and through 2021. We don’t plan to materially alter our existing forecast for Macau industry gaming revenue to return to 2019 levels in early 2022.

Sands robust liquidity profile is also encouraging. At the end of March, the company had $2.6 billion in cash and $3.9 billion in untapped credit availability. Meanwhile, its monthly cash burn at near zero revenue generation is $220 million. This positions the company with enough funds to operate for the next 18 months under current conditions, while still investing in its existing Macau and Singapore assets. In fact, its Londoner renovation in Macau remains on track to open in phases throughout 2020 and 2021, while its expansion in Singapore is still scheduled to open in 2022.

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