Las Vegas Sands Corp.: 1Q19: Results Support Continued Investment

 

1Q hold-adj EBITDA beat cons by 5%, with Macau & Singapore beats. While Macau mass hold was also high, mkt share was the highest since 2Q15. We raise our ests and valuation multiple to reflect greater confidence in our mkt share thesis & the China outlook; our PT increases to $71 from $66; OW.

Macau. LVS reported actual and (VIP) hold-adj property EBITDA of $858m and $835m, above MSe $806m / cons $788m. Total GGR market share of 24.5% was ahead of MSe (23.2%), cons (22.9%), and the highest level since 2Q15. Venetian and Parisian, which both have seen capital put into them over the past few years, saw mass revenue up 21% and 20% respectively, supporting LVS' decision to keep on investing in ROI projects. While mass hold (that is not adjusted in hold-adj EBITDA) was high at 24.8% vs. 22.5% in 2018, we believe LVS benefitted from the strength in premium mass (up 16% y/y), more prop bets, and cage/table chip mix. Assuming a 1% benefit from better mass luck, LVS' 1Q hold-adj market share would have still been 23.2%, 30bps higher than 2018 and 100bps higher than 2017. This supports our thesis that LVS will report stronger than expected market share given its outsized room and mass market share in Macau. We raise our 2019e / 2020e Macau property-level EBITDA estimates to $3.25B / $3.57B from $3.18B / $3.56B (consensus $3.15B / $3.33B) with 2020 impacted by the new Londoner Tower Suites now reflected in 2021 (previously modeled Fall 2020).

Singapore. Actual and hold-adj property-level EBITDA of $423m beat MSe $396m / cons $410m, with VIP and mass table volumes outperforming our expectations. Mgmt did raise its theoretical hold range to 3.00-3.30%, vs. prior 2.70-3.00%, to reflect the higher historical avg. Assuming the midpoint of the old range, we estimate hold-ad EBITDA would have been $10m lower, and $5m lower than our estimate, still suggesting a beat. We raise our 2019e / 2020e EBITDA to $1.63B /$1.67B from $1.60B / $1.63B (consensus $1.56B / $1.61B).

Las Vegas. Hold-adjusted property-level EBITDA of $131m was in between MSe $128m / cons $133.5m, with weak baccarat trends (drop down 32% y/y) offset by strong mass trends (slot win up 10%, mass table volumes up 9%). We see this as a positive read-through for more mass exposed peers. We tweak our 2019e / 2020e EBITDA estimates slightly to $475m / $492m (from $474m / $489m).

Valuation. Our price target increases to $71 from $66 from our higher estimates and we raise our valuation multiple to 13.2x 2020e EBITDA from 12.3x. We believe a multiple closer to LVS' long-term avg (~13.5x) is justified given a broadly more bullish outlook on China, the delay of the first Macau concession renewals from 2020 to 2022, and greater confidence in LVS' ability to outperform Macau market share estimates. If China truly rebounds, we see levers to get to our $96 bull case.