Travel Recovery Aids Las Vegas Sands (LVS), High Debt Hurts
Las Vegas Sands Corp. LVS is benefiting from impressive travel and tourism recovery in Macao and Singapore. Furthermore, the company’s long-term investment commitment in Macao, and renovation and refurbishment program of Marina Bay Sands bode well.
However, high debt and stiff competition are primary concerns.
Let’s delve deeper.
Factors in Favor
Las Vegas Sands has witnessed impressive growth trends post the easing of travel restrictions. In the second quarter of 2023, significant growth in property visitation, gaming volumes, retail sales and hotel occupancy in the Macao region was noticed. Visitation in China (excluding Guangdong province) was approximately 51% while the same in Macao was approximately 70% of the 2019 visitation level in the quarter. The relaxation in travel restriction, as well as an increase in flight capacity, have ensured the continuous market visitation recovery. With the easing of restrictions and recovery in travel and tourism, the company anticipates generating strong cash flows from the region in the days ahead.
Furthermore, Las Vegas Sands’ long-term commitment of $3.8 billion investment in Macao (through 2032), especially in non-gaming, also positioned it impressively well for delivering solid growth in second-quarter 2023. Backed by its long-term commitment investments, LVS aims to capitalize on the likely structural growth in Macao to stay ahead of the curve in terms of quality and scale of its product and amenities. The company stays focused on expanding non-gaming opportunities in Macao.
Increased focus on the Singapore market bode well. In second-quarter 2023, Marina Bay Sands (MBS) achieved solid growth in both gaming and non-gaming segments despite the persisting airlift constraints (primarily from China). As of Jun 30, 2023, the company introduced approximately 1,100 redefined rooms including about 250 new luxurious suites in MBS. Furthermore, certain other improvements in gaming, dining, entertainment and retail offerings were made alongside. Going forward, the company remains optimistic in this regard and anticipates the initiatives to drive growth.
Factors Impeding Growth
Las Vegas Sands’ growth momentum is hindered by its high debt position. Given the ongoing economic uncertainties, maintaining sufficient liquidity has become a herculean task for the company. Total debt outstanding (excluding finance leases and financed purchases) was $14.7 billion, compared with $15.97 billion as of Mar 31, 2023. Although the debt level was sequentially lower, it is still on the higher side compared to LVS’ cash balance. The cash balance, as of Jun 30, 2023, was $5.77 billion, down from $6.53 billion reported in the previous quarter.
Additionally, increased hotel openings and promotional activities have made Las Vegas and Macao markets highly competitive. Thus, excess supply, especially in the Macao market, might reduce the company’s market share.
A Brief Review of the Other Stocks
MGM Resorts International MGM: The company is benefiting from increased business volume and travel activity, primarily at MGM China and Las Vegas Strip Resorts. The removal of COVID-related travel restrictions in Macau resulted in high contributions from the MGM China segment and a rise in visitation. MGM China’s casino revenues skyrocketed 454% year over year to $670 million. Its adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) amounted to $209 million against ($52) million reported in the prior-year quarter. The aforementioned tailwinds backed the uptrend. Also, the company emphasizes on international expansion to drive growth.
Wynn Resorts, Limited WYNN: The company is riding on consistent performance growth in its Macau and North America properties. WYNN witnessed growth in mass gaming, luxury retail and hotel businesses in Macau, portraying exceptional post-Covid recovery. In the second quarter of 2023, the top line increased 75.6% on a year-over-year basis, primarily driven by the performance growth in Wynn Palace and Wynn Macau, resulting from an increase in gaming volumes, hotel occupancy and covers at restaurants. Notably, in the quarter adjusted property EBITDAR was $524.5 million, compared with $179.2 million reported in the prior-year quarter.
Boyd Gaming Corporation BYD: The company is benefiting from solid contributions from online gaming and management fees (from Sky River Casino). Also, its emphasis on strengthening current operations and growth through capital investment and other strategic measures bode well. Moreover, the expansion of online betting offerings bodes well. During second-quarter 2023, the company repurchased shares of its common stock worth $100 million. As of Jun 30, 2023, BYD stated the availability of $533 million under its repurchase program.
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