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Fitch adjusts forecast on dividend payments for Sands China

February 5, 2024 MacauSingapore Casino & Hotel

Fitch Ratings Inc. has revised its dividend payment prediction for Macau casino operator Sands China Ltd., forecasting a restart in 2026, in contrast to the previous estimate of 2025 provided in a July update.

The rating agency has also upgraded Sands China’s parent company, Las Vegas Sands Corp., to investment grade (‘BBB-‘) from ‘BB+’, along with its Macau and Singapore businesses. The group’s ratings are classified as “stable.”

The main driver for this decision was the anticipated increase in the group’s earnings before interest, taxes, depreciation, and amortization (EBITDA) leverage. Fitch looked at a number of possibilities, such as stock buybacks, the possible 2026 start of Sands China dividend payments, and the parent company’s US$0.20 quarterly common dividend payment, which translates to an annual cost of US$600 million.

Fitch emphasized that the recovery of business in the Macau and Singapore markets during the pandemic was one of the key factors that impacted the group’s ratings. It stressed that Las Vegas Sands was ready to manage its balance sheet in accordance with investment grade ratings and that the company had a strong track record of clearly communicating its leverage strategy and keeping a cautious balance sheet.

Fitch stated that while it did not make any assumptions about the financial implications of Las Vegas Sands potentially acquiring a project in New York City, it believed the group’s high cash balances and strong free cash flow from its current Macau and Singapore operations could adequately fund the capital outlays associated with such an endeavor.

The upgrade was ascribed by the ratings agency to enhanced leverage measures, which came about as a consequence of Singapore’s superior performance and a robust recovery in the Macau market. It did, however, warn of possible problems, such as China’s deteriorating economy, shifting regulations, and growing rivalry with Macau.

Despite these misgivings, Fitch maintained the “stable” outlook by highlighting rising traveler numbers and expenditure in Macau and Singapore, which have stabilized operations and supplied enough capital to shield Las Vegas Sands from recessions.

Citing Macau’s spectacular performance in Singapore and its return, S&P Global Ratings upgraded Sands China and Las Vegas Sands to investment grade in July of last year.

Original story by: GGRAsia

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