Las Vegas Sands Stock Might Be A Buy...Just Not Yet
Vince Martin | May 25, 2022 12:07PM ET
This article was written exclusively for Investing.com
For most publicly traded leisure companies, normalcy is returning after the worldwide novel coronavirus pandemic. But that hasn't been the case for Las Vegas Sands (NYSE:LVS), the global developer of integrated resorts which include gaming, entertainment, and retail malls.
As most of the world opens up, China continues to enact significant restrictions on travel, including to the enclave of Macau where LVS has several major properties. At the moment, there seems little change in that policy; so-called “New York City market. A resort in Thailand is another possibility.
In China and Singapore, meanwhile, normalcy will return at some point, and then so will gamblers. Most US casinos in fact posted record results in 2021, in part because of pent-up demand. At some point in the future, Las Vegas Sands' properties in Macau and Singapore will see the same benefit.
Yes, the outlook appears dark now—but few analysts were recommending American gaming stocks in March or April of 2020. The sector was one of the best-performing in the entire market over the next 18 months.
And if normalcy does return, at some point LVS stock will look awfully cheap. The company currently has an enterprise value (market cap plus net debt) of about $31 billion. That's less than 8x 2019 Adjusted Property EBITDA from Asia, even adjusted for the company's 70% ownership of its Macau operations. (Sands' China subsidiary, Sands China (HK:1928), is listed on the Hong Kong Stock Exchange.)
Before the pandemic, LVS usually traded at 12x-15x on that basis before the pandemic. Assume the company can recapture even the low end of that range and the stock nearly doubles—even without any value added from new developments, or the roughly $1 billion being invested to improve and expand the Singapore property.
Those returns aren't guaranteed. At the very least, they will require patience. But, until recently, investors had that patience. When the market again starts taking the long view, LVS stock should find a rally.
Disclaimer: As of this writing, Vince Martin has no positions in any securities mentioned.
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