Nevada sell-off by LVS may aid dividend return: Bernstein
The planned sale for US$6.25 billion, of the Nevada gaming assets of United States-based casino group Las Vegas Sands Corp announced on Wednesday, could “accelerate the timing of dividend resumption” for the firm, or “even lead to some form of special dividend”, said a Wednesday note from brokerage Sanford C. Bernstein Ltd.
In September it was announced that Las Vegas Sands had agreed with one of its lenders that the casino firm would for the time being, not declare or pay any dividends unless it had more than US$1.0 billion in liquidity.
Las Vegas Sands is the parent of Macau casino operator Sands China Ltd, and Marina Bay Sands Pte Ltd, the promoter of Singapore’s Marina Bay Sands gaming resort.
“We expect the dividend to resume – initially at a lower level than 2019 – in 2022 under the assumption that Macau and Singapore would get back to more normal business levels,” said the memo from analysts Vitaly Umansky, Kelsey Zhu, Tianjiao Yu and Louis Li.
The sale of the casino operator’s Las Vegas assets for US$6.25 billion “could accelerate the timing of dividend resumption (or even lead to some form of special dividend at Las Vegas Sands – although maybe this is wishful thinking),” wrote the institution.
Sanford Bernstein noted that gross debt at the parent-firm level – i.e., excluding Macau and Singapore – was “US$4 billion at year end, slightly above where it was pre-Covid-19”.
Las Vegas Sands was “focused on maintaining its investment-grade rating and as such, will reduce leverage if needed; but we do not expect the debt paydown to be significant, if at all,” in terms of use of the Nevada sale proceeds, stated the brokerage.
Better ROI elsewhere
In discussion of the “key question” of what Las Vegas Sands would do with the US$6.25 billion from the Nevada asset sale, the brokerage acknowledged the casino group’s own commentary that it would look at scenarios with higher return on investment (ROI) than the Las Vegas market.
“While there will be a recovery, long-term outsized growth in Las Vegas was never going to be something that Las Vegas Sands had any confidence in,” stated the analysts.
Injecting Nevada sale proceeds into the group’s commitment for a SGD4.5 billion (about US$3.4 billion) expansion of Marina Bay Sands “may not be necessary”, said Sanford Bernstein.
The brokerage noted “over US$1.1 billion” had already been spent on that commitment, but the “residual investment in Marina Bay Sands could be funded at the property level with future cash flows”.
Sanford Bernstein further observed, regarding the Macau operation: “There is no need to inject any immediate capital into Sands China nor do we believe is there an ability for Las Vegas Sands to buy back stock in Sands China”.
In relation to the chances of Las Vegas Sands taking a fresh look at a Japan casino licence bid, the analysts wrote: “We do not expect Las Vegas Sands to jump back into the Japan bid process. The only caveat would be if Tokyo were to move forward” as a candidate location, “which does not appear to be the case today.”
The U.S. online gaming market – another possible investment target mentioned by investment analysts – would, in Sanford Bernstein’s view, be “fraught with risk”.
“Las Vegas Sands has no real competitive advantage in the U..S – i.e., a regional casino footprint – that would potentially be a complement to an existing iGaming operator… we assume the U.S. database [of customers] at Las Vegas Sands would go with the Las Vegas assets,” added the brokerage.
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