LVS Stock Made a Mistake Relying on Macau, for Now

August 16, 2022 World Earnings & Filings Industry Updates

Casino and resort giant Las Vegas Sands (LVS) appears to be in a pickle, being completely levered to its operations in Macau, a special administrative region of China. Unfortunately for the company, Macau is following China’s leadership when it comes to draconian COVID-19 mandates, thus devastating sales. While the situation doesn’t look pleasant now, patient investors may be rewarded for their commitment. I am neutral on LVS stock.

In March of 2021, Las Vegas Sands generated headlines when it announced that it would sell its geographical namesake properties for $6.25 billion. Vici Properties (VICI) paid $4 billion to buy out the real estate, while Apollo Global Management (APO) bought the operations for $2.25 billion.

Essentially, the sale represented a shot across the bow, with Las Vegas Sands doubling down on its investments in Asia. Prior to the COVID-19 crisis, the company’s eastern properties accounted for approximately 90% of its revenue.

At the moment, though, management may be regretting the decision. While Macau has an unorthodox relationship with Beijing, the gambling mecca of Asia has generally marched in lockstep with the mainland’s strict COVID-19 policies. Disappointing legions of gamblers, Macau-based casino sales tumbled, dropping from one low to another.

Curiously, though, LVS stock has held up relatively well. Shares are up about 3% on a year-to-date basis, and performing considerably better than Wynn Resorts (WYNN), which is down almost 20% during the same period. As well, MGM Resorts (MGM) is posting similar levels of underperformance to WYNN, shedding 21% YTD.