GGRAsia – Marina Bay Sands could gain from HK uncertainties: DB

Marina Bay Sands could gain from HK uncertainties: DB

Sep 09, 2019 Newsdesk Latest News, Macau, Singapore, Top of the deck

Las Vegas Sands Corp’s Marina Bay Sands casino resort (pictured) in Singapore could benefit in the near term from any potential displacement of player activity in Macau that might be linked to the ongoing protests in Hong Kong.

So said a Sunday memo from Carlo Santarelli, Steven Pizzella and Brian Mullan, analysts at Deutsche Bank Securities Inc.

The institution said “medium to longer-term oriented investors” in United States-based Las Vegas Sands could position themselves “at present” for factors including “potential near-term benefits at Marina Bay Sands stemming from the Hong Kong protests and the longer-term benefits from the Marina Bay Sands hotel and amenities expansion…”

The U.S. casino group is also the parent of Sands China Ltd, a licensee in the Macau market.

Macau’s visitor arrival tally for August maintained year-on-year growth despite concerns from the city’s travel industry that inbound group tours might be negatively affected by months of street protests in neighbouring Hong Kong, said the head of Macau’s tourism bureau last week.

Tourism volume in itself is not necessarily a predictor of Macau casino gross gaming revenue (GGR) performance, as a number of analysts has said that the Macau market still tends to be focused on a pool of premium players betting in high minimums, even within the mass-market segment.

Las Vegas Sands is the parent of Marina Bay Sands Pte Ltd, the promoter of Marina Bay Sands, which shares a casino duopoly in the Singapore market with Resorts World Sentosa, a venue promoted by Genting Singapore Ltd.

The Singaporean government said on April 3 it had agreed to the expansion of the city-state’s two integrated casino resorts. In return for their investment – an aggregate of SGD9 billion (US$6.5 billion) – the respective operators would continue to hold a duopoly on casino gambling in Singapore through to 2030, it added at the time.

Las Vegas Sands confirmed in a filing last week that it had negotiated a new delayed-draw term-loan facility in an aggregate principal amount of up to SGD3.75 billion that would be used for the Marina Bays Sands extension.

Potential catalysts for Las Vegas Sands’ share price mentioned by Deutsche Bank in its Sunday memo included “progress towards Tokyo and Yokohama requests for concept in 2020” – a reference to two Japanese cities that are respectively interested in hosting a casino resort with a private-sector partner. Las Vegas Sands is a suitor for a casino licence in Japan.

Deutsche Bank also mentioned as potential share price catalysts for the casino group: “a dividend increase in conjunction with third-quarter 2019 earnings”; a “potential addition” of Las Vegas Sands’ stock to the S&P 500 index; a “near-term resumption of Macau market GGR growth”; and “easing of geopolitical tensions that have impacted sentiment towards Macau”.

The latter topic was understood to be a reference to the U.S.-China trade war that has seen the U.S. place tariffs on certain imports from China, and China to make reciprocal moves on certain imports from the U.S.

Referring to the U.S. casino operator’s shares, the Deutsche Bank team stated: “From a trading perspective, we believe Las Vegas Sands has largely priced in the primarily Macau-based headwinds that have impacted the business.”

The analysts added: “We expect positive Macau GGR comparisons in the near term and believe this cadence will alter what has been decidedly negative Macau sentiment.”

Positive mid- to long-term Macau catalysts for Las Vegas Sands included, according to Deutsche Bank, “continued Macau mass market stability, driven over the medium term horizon by new capacity, which has historically stimulated outsized mass market growth.”

Other positive factors mentioned were “the lapping of meaningful expense creep in Macau as we move through the second half of 2019″ – a reference to ongoing expansion and refurbishment projects involving Sands China’s Cotai properties –, leading to a “capacity boosted EBITDAR [earnings before interest, taxation, depreciation, amortisation, and restructuring or rent costs] growth rate in Macau in 2020 and beyond”.

The closing price of Las Vegas Sands’ shares in Friday trading in New York was US$56.19, noted Deutsche Bank, which placed a target price of US$70.00 on the stock.