Las Vegas Sands Shares Plunge: Why Investors Should Avoid It

September 17, 2020

Integrated resorts gaming giant Las Vegas Sands Corp (NYSE: LVS) saw its share price plummet by as much as 9% on news that its Marina Bay Sands casino was under investigation by Singapore police over third-party transfers.

It later pared back the losses and closed the day down 4.2%.

Tim’s Take:

Las Vegas Sands, also known as LVS, has been a veritable giant in the gaming industry. With a heavy presence in Asia, through Sands China’s (SHEK: 1929) integrated resorts in Macau and its Singapore Marina Bay Sands casino, you’d think the firm led by Sheldon Adelson would be in a prime position to keep growing.

You may have been right about that back in 2018. But the pain Macau casinos went through on the back of the Hong Kong protests last year started to meaningfully impact a business that’s reliant on Chinese tourists.

Then came the Covid-19 pandemic. It has absolutely crushed revenues in Macau. LVS is also heavily reliant on its Sands China business, which brought in nearly 60% of the group’s adjusted property EBITDA in 2019. The latest development out of Singapore just adds to its headaches.

Fair enough, the Chinese government has lifted travel restrictions and visas on mainland Chinese tourists wishing to visit Macau but how much of a lift is that going to provide?

Disruption and doubts on growth

I’m not sold on the company’s long-term growth trajectory. Dropping out of the race to open a Japan integrated resort earlier this year was a blow in tapping a market with a potential size of around US$16 billion a year in gaming revenues.

Structurally, the company is facing headwinds on multiple fronts. I doubt the meetings, incentives, conferencing, and exhibitions (MICE) business is going to get back to normal any time soon in Macau.

Although LVS dominates that space, and has perfected the model in Las Vegas, there are serious doubts in a post-pandemic world whether those types of events will be carried out on the same scale.

Then you’ve got DraftKings Inc (NASDAQ: DKNG) eating into the online gambling market in the US. It’s early days but that doesn’t bode well for the incumbent casino operators if the eventual legalisation of online gambling disrupts the integrated resort model.

With a cancelled dividend and rising Sino-US tensions to add to the above list of growing problems, LVS doesn’t look to be coming out of its funk (shares have fallen 30% year-to-date) any time soon.

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

This material is categorised as non-independent for the purposes of CGS-CIMB Securities (Singapore) Pte. Ltd. and its affiliates (collectively “CGS-CIMB”) and therefore does not provide an impartial or objective assessment of the subject matter and does not constitute independent research. Consequently, this material has not been prepared in accordance with legal requirements designed to promote the independence of research. Therefore, this material is considered a marketing communication.

This material is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CGS-CIMB’s clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this material. The information and opinions in this material are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, derivative contracts, related investments or other financial instruments or any derivative instrument, or any rights pertaining thereto. CGS-CIMB have not, and will not accept any obligation to check or ensure the adequacy, accuracy, completeness, reliability or fairness of any information and opinion contained in this material. CGS-CIMB shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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