Las Vegas Sands earns spot on Deutsche Bank’s “Fresh Money List”

December 21, 2023 World Casino & Hotel Industry Updates

Las Vegas Sands (LVS) has been included in Deutsche Bank’s “Fresh Money List” for the first quarter of 2024, a list of equities that the research company believes will do well in the next year.

LVS is receiving attention as the group’s lone gaming equity and the biggest casino operator by market capitalization, amid a rush of favorable calls and assessments establishing it as one of Wall Street’s top gaming ideas for 2024.

Despite LVS shares’ small 1.73% year-to-date rise, which trails the S&P 500’s 24.31% increase, Deutsche Bank analyst Carlo Santarelli sees tremendous potential at present prices. He claims that fears about Macau’s recovery trajectory are unfounded and predicts a rationalization over time.

As Santarelli went on to say, “We see this rationalizing over time and believe LVS, from both a fundamental and valuation perspective, represents a compelling long idea moving forward.” The analyst emphasized the potential for further expansion in Macau, which might be appealing to investors with consumer-oriented portfolios that are mostly domestic in nature. LVS currently does not run a casino hotel in the United States, which might be an advantage given the likelihood of lower wagering-related expenditure by US customers in the next year.

This year, Macau has made a strong comeback from the effects of China’s coronavirus restrictions. However, most concessionaire shares, notably Sands China, have failed to reflect the region’s robust gross gaming revenue (GGR) developments. According to Santarelli, the challenges in China and Macau are widely documented, and the reduced values may be due to operator worries about property investment levels and fears of a weak Chinese economy influencing gaming-related expenditure.

In response to these fears, Santarelli said that prior times of Chinese economic instability did not have a substantial impact on Macau expenditure. He underlined that both LVS and Sands China are now undervalued, trading at lower earnings multiples than historical averages.

The analyst also emphasized Las Vegas Sands’ initiatives in shareholder incentives, such as the recent reinstatement of its quarterly dividend and a $2 billion share buyback plan. Santarelli feels that these actions might help the company, especially considering its current price.

“Management has stated that historically, it has allocated capital returns in an 80/20 fashion with dividends and buybacks. However, given current share levels, LVS anticipates buybacks to surpass dividends in the future,” Santarelli stated. “Recall that LVS now pays an annual dividend of $0.80 per share, which amounts to $600 million each year. Given the current price of 10.3x our 2024 adjusted EBITDA estimate and 9.1x our 2025 adjusted EBITDA estimate, we anticipate LVS to be aggressive in the early phases of the repurchase.”