Las Vegas Sands (LVS) Oct 2024 Valuation Model and Risk Framework

This LVS valuation model includes an asset/SOTP valuation, company comparable relative value matrix, financial forecasts, segment breakdown, and detailed operating model. Assumptions can easily be adjusted by the user.

Las Vegas Sands is one of a handful of companies in Macau that could potentially benefit from higher China stimulus.

LVS is best positioned for long-term Macau China penetration story given its scale of hotel rooms
Well positioned for premium mass growth with new hotel suites, premium mass is expected to grow as VIP shrinks
Singapore market continues to recover, driven by excess pent-up demand in Asia
Strong B/S (~2x leverage at YE24)
Given its development track record, LVS is well positioned to win casino licenses in new markets (New York, SE Asia)
2025e Geographic EBITDAR Exposure: ~60% Macau, 40% Singapore

In the case of WYNN, LVS, MLCO and, to an extent, MGM, absolutely negative sentiment on Macau has caused these stocks to be sizable underperformers. WYNN was down ~17% YTD as of Sept 1, versus the SPX, which had returned ~16% YTD. Its share price was back to March 2006 levels in early September (this is not a typo). Since then, the stock has rallied over 20%.

We think LVS, in the $30s/40s, represents a good risk-reward, with a value that we can argue reflects reasonably low to fair value for its assets.

However, given the recent run up over the last 2 weeks, we would wait for a pullback below $45/share to get involved.

We lay out the math in the model.

Business Overview

Las Vegas Sands Corp. is the leading global developer of destination projects that feature premium accommodations, world-class gaming, entertainment and retail malls, convention and exhibition facilities, celebrity chef restaurants and other amenities. Through its majority-owned Sands China subsidiary, the company operates The Venetian Macao on the Cotai Strip, as well as four other properties in Macao. LVSC's portfolio also includes the Marina Bay Sands in Singapore and The Venetian Resort and the Sands Expo and Convention Center in Las Vegas.

Operations

Through its 69.9% ownership of Sands China Ltd., LVSC owns and operates a collection of Integrated Resorts in the Macao Special Administrative of the People's Republic of China. These properties include The Venetian Macao Resort Hotel; The Londoner Macao; The Parisian Macao; The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip; and the Sands Macao.

More than 70% of LVSC's revenue comes from its casino operations, while its hotel rooms bring in over 10% of revenue. Mall activities (some 10%), food and beverage, and convention, retail, and other make up the remaining revenue.

The company's properties in Macao and Singapore, feature a total of nearly 7,000 slot machines and 2,400 table games

The Londoner Macao (previously Sands Cotai Central), its largest Integrated Resort on the Cotai Strip, is located across the street from The Venetian Macao, The Parisian Macao and The Plaza Macao and Four Seasons Macao. The Londoner Macao is the result of its renovation, expansion and rebranding of Sands Cotai Central, which included the addition of extensive thematic elements both externally and internally and was completed during 2022.

Geographic Reach

Outside of Las Vegas (where the company is based), LVSC operates in Macao and Singapore.

Sales and Marketing

LVSC properties cater to high-end players by providing them with luxury amenities and premium service levels. These amenities include luxury accommodations, restaurants, lounges, invitation-only clubs and private gaming salons. In each of the regions where it operates, the Paiza brand is associated with certain of these exclusive facilities and represents an important part of its VIP gaming marketing strategy. LVSC also offers players club loyalty programs at its properties, which provide access to rewards, privileges and members-only events. In addition, the company believes being in the retail mall business and, specifically, owning some of the largest retail properties in Asia will provide meaningful value for the company, particularly as the retail market in Asia continues to grow.

LVSC spent $47 million, $29 million, and $31 million in advertising for 2023, 2022, and 2021, respectively.

Financial Performance

Las Vegas Sands Corp's performance for the past five years has fluctuated with an upward trend since the decrease in 2019 to 2020 and ending with 2023 as the second-highest performing year over the period.

LVSC reported a revenue increased by $6.3 billion to $10.4 billion in 2023, as compared to 2022's revenue of $4.1 billion.

The company recorded a net income of $1.4 billion for fiscal year 2023, as compared to the prior year's net loss of $1.5 billion.

The company ended 2023 with about $5.2 billion in cash on hand. Operating activities provided $3.2 billion to the coffers. The company's investing activities and financing activities used $1.3 billion and $3.2 billion, respectively. Main cash was used primarily for capital expenditures and repayments of long-term debt.

Strategy

LVSC's strategies include:

Diversified, high quality Integrated Resort offerings with substantial non-gaming amenities; Substantial and diversified cash flow from existing operations; Substantial and diversified cash flow from existing operations; Market leadership in the growing high-margin mass market gaming segment; Established brands with broad regional and international market awareness and appeal; Experienced management team with a proven track record; Unique MICE and entertainment facilities; Developing and diversifying its Integrated Resort offerings to include a full complement of products and services to cater to different market segments; Leveraging our scale of operations to create and maintain an absolute cost advantage; Focusing on the high-margin mass market gaming segment, while continuing to provide luxury amenities and high service levels to our VIP and premium players; and Identifying targeted investment opportunities to drive growth across its portfolio

Company Background

Las Vegas Sands Corp. traces its roots back to the late 1980s, when Sheldon Adelson, founder the computer trade show COMDEX, and other partners bought the Sands Hotel in Las Vegas. Ten years afer buying the historic casino, Adelson demolished the Sands Hotel and opened The Venetian Las Vegas, a Venice-themed casino resort inspired by a trip Adelson took with his wife to the coastal Italian city.

The company went public in 2004 and, fueled by the influx of cash from public investors, began establishing itself internationally in Asia in the late 2000s.

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