GGRAsia – Sands China dividend likely in 2025: Morgan Stanley

Sands China dividend likely in 2025: Morgan Stanley

Sep 27, 2024 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator Sands China Ltd will in likelihood resume dividend payments in 2025, suggested Morgan Stanley in a Thursday note. The banking institution expects dividend payments to restart as the firm’s business performance is likely to improve from the fourth quarter this year.

According to the memo, prior to Covid-19, Sands China “consistently paid out dividend-per-share of HKD1.99 [US$0.256] each year from 2014”.

The casino firm’s ratio of net debt to earnings before interest, taxation, depreciation and amortisation (EBITDA) “declined from 5.7 times at end-2022 to 2.8 times at end of first-half 2024, and shareholder equity turned positive in [the] end of first-half 2024,” wrote analysts Praveen Choudhary, Gareth Leung, and Stephen Grambling.

The improvement in business conditions “should enable the company to resume HKD0.70 to HKD1.00 dividend-per-share in 2025, implying 4.4 percent to 6.3 percent dividend yield,” they stated.

“If the company returns to its pre-Covid dividend levels, this would imply a 13 percent dividend yield,” the analysts added.

The Morgan Stanley team said it thought Sands China was “the only company in Macau with identifiable catalysts,” as the company starts to reopen some of the facilities that were under renovation.

The remodelled former Pacifica casino – now rebranded The Londoner Grand Casino – at The Londoner Macao property opened on Thursday, a Sands China spokesperson confirmed to GGRAsia.

The firm is also renovating hotel space at The Londoner Macao (pictured) in Cotai, replacing the Sheraton brand with The Londoner Grand, to be marketed under The Luxury Collection Hotels & Resorts system of Marriott International Inc.

The Londoner Grand-branded hotel space is to have 2,405 rooms, including 1,500 suites.

The casino operator said earlier this month that Charlie Puth, a Grammy-nominated singer, songwriter and producer, is to stage a concert of his “Something New” tour at the revamped and rebranded “Venetian Arena” on December 14.

The concert and large-event venue at The Venetian Macao casino resort – previously branded Cotai Arena – closed down for renovation at the beginning of the year.

In Thursday’s note, Morgan Stanley observed that the third quarter represented the “peak disruption” regarding Sands China’s renovation projects, “likely resulting in market share improvement from fourth-quarter 2024 onwards”.

“We predict Sands’ mass GGR [gross gaming revenue] market share to recover from 24.9 percent in second-quarter 2024 to 26.0 percent in 2025,” stated the analysts.

Despite the expected improvement in business volumes, the institution said it had trimmed its estimates for Sands China’s revenue in EBITDA.

“This is because we trim Macau industry 2025 estimate GGR by 4 percent to US$29.8 billion (+6 percent year-on-year, 82 percent of 2019 level), and we assume lower mass market share for Sands,” wrote the Morgan Stanley analysts.

“We also raise our mass reinvestment ratio estimates for Sands,” they added.

The bank now expects Sands China to achieve net revenue of US$7.04 billion this year, down 0.7 percent from its previous estimate. The institution’s forecast for Sands China’s EBITDA this year is down 2.2 percent on the previous estimate, to just under US$2.14 billion.

The EBITDA estimate for Sands China in 2025 was also lowered by 9.9 percent, to US$2.51 billion. If achieved, it would represent a 17-percent year-on-year increase, according to Morgan Stanley’s forecast.