Las Vegas Sands Corp. (NYSE: LVS). Given its many hotel rooms (particularly, the Venetian Macau and Four Seasons Macau), we think Las Vegas Sands is well positioned for recovery in Macau. However, following another weak quarter, we believe that recovery at LVS will be difficult and require more time than management anticipates.
EBITDA in Macau plunged to negative $233 million from positive $755 million last year. The consensus loss estimate was $252 million. The decline reflected a steep drop in mass-market gaming volume, offset in part by solid results in the premium mass market. The Marina Bay Sands in Singapore reported adjusted EBITDA of $70 million, down from $436 million in the prior-year period but $63 million above consensus. Las Vegas EBITDA fell to a loss of $40 million from a gain of $93 million in 3Q19, and missed the consensus estimate by nearly $3 million. We estimate that on a hold-adjusted basis, the Las Vegas business lost $5 million. RevPAR at the company’s Las Vegas hotels fell more than 66% to $76, driven by a 27% decline in the average daily rate and an almost 51% decrease in occupancy, to 44%.
The year-over-year decline reflected casino closures and travel restrictions aimed at slowing the spread of the coronavirus.
On a hold-adjusted basis, the EBITDA loss was $184 million. Interest expense held steady at $137 million as interest rates fell but debt balances rose. LVS suspended share repurchases in March, but we believe they could soon be reinstated.
As discussed in a previous note, in 2019, revenue totaled $13.7 billion, up $5 million from 2018, while EPS fell to $3.26 from $3.32.
EARNINGS & GROWTH ANALYSIS
In Singapore, the Marina Bay Sands posted positive EBITDA, as slot machine demand fell less sharply than anticipated. However, recovery is likely to be muted due to the lack of international tourists.
FINANCIAL STRENGTH & DIVIDEND
Given the current state of its business and balance sheet, management believes that the company has enough liquidity to last 15 months or longer.
In March, the company suspended share buybacks and dividend payments.
In Las Vegas, increased capacity could depress room rates at hotels and reduce the number of gamblers at individual casinos. In addition, a new downturn in the economy and an accompanying reduction in discretionary income could hurt hotel and casino revenues.
Las Vegas Sands owns and operates the Venetian Casino Resort and the Sands Expo and Convention Center and the Palazzo Casino Resort in Las Vegas; The Sands Casino Resort in Bethlehem; the Sands Macau Casino, the Venetian Macao and the Four Seasons Hotel in China; and the Marina Bay Sands in Singapore. The company is also pursuing a range of other gaming opportunities in Asia, Europe and the U.S.
LVS is trading at 22.2-times our revised 2021 EPS estimate, which we believe adequately reflects the company’s challenging near-term outlook. The current multiple is in line with those of other Macau-focused gaming companies.
On October 26 at midday, HOLD-rated LVS traded at $49.24, down $1.44.