Market Overview

Morgan Stanley Says Macau Worse Than Expected, Singapore And Vegas 'Roughly' In Line


In a report published Thursday, Morgan Stanley analyst Thomas Allen commented on Las Vegas Sands Corp. (NYSE: LVS)'s first quarter results in which Macau EBITDA was worse than expected while Singapore and Las Vegas were "roughly" in-line with expectations.

Allen noted that Macau EBITDA of $528 million was 9 percent below his estimates, with two thirds of the miss coming from lower hotel revenue while expenses were in line with expectations, highlighting the "inherent" negative operating leverage.

"While management remained confident in the long-term Macau opportunity, it offered no signs (beyond hope) of near-term relief," Allen wrote. "While promotional spending remained in check, the lower occupancy levels (combined with steady increases in market-wide visitation) suggest that competition or cash-paying hotel guests is beginning to increase."

Allen added that on a positive note, Las Vegas Sands' management does not believe that the local government will implement a rumored mainland visitation cap.

Nevertheless, the weaker results in Macau calls in to question the company's capital allocation plans. This is evident from management's lack of comments to buyback stock in the quarter, marking a large deviation from its prior commitment to repurchase $75 million worth of stock per month.

Meanwhile, Singapore results were "roughly" in-line with expectations with both mass and rolling chip trends improving (after adjusting for foreign exchange), but the hotel business was weaker than expected. Vegas core trends appeared "strong" as mass table volumes were higher by 3 percent.

Bottom line, Las Vegas Sands continues to be the best positioned company for longer-term Macau success, the company lacks near-term catalysts while the near-term volatility limits attractiveness for yield-seeking investors.

Shares remain Equal-weight rated with a price target lowered to $51 from a previous $52.

Latest Ratings for LVS

Jan 2020MaintainsEqual-Weight
Jan 2020DowngradesBuyHold
Dec 2019MaintainsBuy

View More Analyst Ratings for LVS
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Posted-In: gaming Las Vegas Macau Morgan Stanley SingaporeAnalyst Color Price Target Analyst Ratings


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