Could Las Vegas Sands be headed Down Under?

Las Vegas Sands CorpLOGO

Las Vegas Sands could be making their move into the Australian market, with a sale of Vegas assets potentially preparing the group to make a splash Down Under.

Reuters reports that Sands has cash in hand after negotiating a rich $6.3 billion for its Las Vegas assets, while Crown Resorts would offer an affordable addition to its Asian empire.

The group, founded by the late Sheldon Adelson, would also be welcomed by Australian authorities.

The mathematics of the situation makes it more attractive than other opportunities.

Sands is selling out of its American casinos for a value of 13 times the earnings before interest, tax, depreciation and amortisation for 2019, according to Bernstein.

Meanwhile, Packer’s beleaguered casino business is currently valued at about eight times that measure for the same year, setting aside non-recurring items.

Although the Australian outfit boasts a brand new property and mature resorts in Melbourne and Perth, share values are pressured by a year-long inquiry that revealed lapses in governance and compliance.

As a result, Crown lost its operator licence in Sydney and may yet lose licences elsewhere.

Australia’s tough anti-COVID-19 measures have also impeded growth.

It is reported that Sands could in fact do more with Crown’s assets.

Its reputation for upholding high standards in the most demanding regulatory environments, namely Nevada and Singapore, will play well with wary local watchdogs.

Crucially, its business model does not depend on high rollers and shaky junkets that finance their visits, a relationship that has landed Crown in hot water.

Thanks to Adelson’s emphasis on non-gaming operations such as events and conferences, Sands is positioned to cater to a less risky demographic.

Buying Crown would mean sacrificing other options, however.

Aside from reinvesting in its existing operations in Macau and Singapore, Sands says it is scrutinising online opportunities.

It lags behind peers including MGM Resorts International and Wynn Resorts on this front, and the industry is poised for a boom as the United States relaxes rules.

However, margins are uncertain and valuations are high.

Digital sports gaming group DraftKings, which reported a widening net loss of $844 million in 2020, has nevertheless seen shares soar more than 40 per cent year-to-date.

An acquisition would mark a behavioural change for $50 billion Sands, which has historically preferred building to buying.

On the other hand, the country is embarking on a new year and anything’s possible.

Las Vegas Sands suffering from pandemic induced losses

COVID-19 las vegas sands

The coronavirus pandemic has taken its toll on global casino operator Las Vegas Sands, which reported a fourth-quarter loss.

Barrons reported in January that on an adjusted basis, Las Vegas Sands notched a loss of 32 cents a share, compared with positive earnings of 88 cents in 2019’s fourth quarter.

Fourth-quarter revenue totalled a little more than $1.1 billion, down 67 per cent from $3.5 billion in the corresponding period in 2019.

In after-hours trading, the stock was at $48 and change, down about one cent.

The company’s financial results were partly overshadowed by the death of its founder and longtime chief executive officer Sheldon Adelson in early January, aged 87.

Company veteran Robert G Goldstein who stepped in as chairman and chief executive officer on an interim basis was officially named to those positions earlier this week.

Goldstein has been with the company since 1995, most recently having worked as chief operating officer.

Speaking to analysts on the company’s fourth-quarter earnings call Wednesday after the market closed, Goldstein, who described Adelson as a great friend and mentor said “the last two weeks have been the most difficult in our company’s history.”

In a release following the market’s close Wednesday, Goldstein said “the recovery process from the COVID-19 pandemic continues to progress in both Macau and Singapore, but concerns remain.”

Asked about trends in Macau, where Las Vegas Sands generates a big chunk of its revenues, a company executive on the call cited “the trending of the pandemic and some of these isolated outbreaks” in certain provinces in China.

“With that in mind, it’s not easy to see a relaxation in terms of the current guidelines in terms of travel” in China, the executive added.

Another issue Las Vegas Sands faces is that the company’s concession to operate its properties in China comes up for renewal in less than two years.

Although the company is based in Las Vegas, most of its revenue comes from operations outside the United States, in places such as Macau and Singapore.

In 2019, for example, about $1.8 billion, or about 13 per cent of the company’s $13.7 billion of net revenues came from Las Vegas.

William Brown

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