Completing The Londoner In 2025 Will Strengthen Competitive Position In Macao

Key Takeaways

• Completion of the Londoner and superior asset quality in Macao enhance competitive positioning, driving EBITDA growth and margin expansion.
  
• Investments and capital returns in Macao and Singapore markets are expected to boost revenues, EPS, and target high-margin segments.
  
• Reliance on Macao and the Chinese economy, along with competition and operational challenges, poses risks to Las Vegas Sands' revenue growth and margins.

Catalysts

Owns, develops, and operates integrated resorts in Macao and Singapore.

• The completion of the Londoner in May 2025 is expected to significantly enhance Las Vegas Sands' competitive position in Macao, leading to meaningful EBITDA growth and margin expansion. This will likely impact revenue and net margins positively as more room inventory becomes available and the property's offerings are fully utilized.
  
• The Macao market continues to grow, with expectations that gross gaming revenue will exceed $30 billion in 2025. This, coupled with Sands' superior asset quality and market positioning, suggests anticipated revenue growth exceeding that of the wider Macao market.
  
• Singapore's Marina Bay Sands (MBS) is experiencing robust growth in both gaming and high-value tourism, boosted by completed capital investments. This is expected to drive further revenue and EBITDA growth, enhancing earnings in this market segment.
  
• The investment in high-quality assets and substantial scale in Macao and Singapore supports Las Vegas Sands' strategic plan to capture high-margin tours and customers, potentially improving revenue and net margins through an increased focus on the most profitable segments.
  
• The company's ongoing capital return program, including stock repurchases and increased dividends, underscores confidence in future growth and supports earnings per share (EPS) expansion by reducing the share count and returning value directly to shareholders.

Las Vegas Sands Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Las Vegas Sands's revenue will grow by 6.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 12.8% today to 16.6% in 3 years time.
• Analysts expect earnings to reach $2.3 billion (and earnings per share of $3.27) by about March 2028, up from $1.4 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $2.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.8x on those 2028 earnings, down from 22.3x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
• Analysts expect the number of shares outstanding to decline by 3.91% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.78%, as per the Simply Wall St company report.

Las Vegas Sands Future Earnings Per Share Growth

Risks

• The dependency on growth in the Chinese economy and the Macao market presents a risk; if the Chinese economy doesn't grow as expected, it could negatively impact revenue and margins.
  
• A decrease in turnover rents, particularly related to the Four Seasons mall in Macao, could reflect a broader softness in the high-end retail segment, impacting overall earnings.
  
• Challenges in ramping up the Londoner property with room inventory still below full capacity can continue to be a drag on margins and limit revenue growth until fully operational.
  
• The possibility of increased competition from i-gaming legalization in markets like New York may dilute the value of their land-based operations, thus impacting future revenue growth and margins.
  
• Concerns related to the promotional intensity in Macao could lead to margin compression if competitors begin aggressive promotional activities in anticipation of Londoner's full launch.

Valuation

• The analysts have a consensus price target of $57.953 for Las Vegas Sands based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $67.0, and the most bearish reporting a price target of just $49.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.7 billion, earnings will come to $2.3 billion, and it would be trading on a PE ratio of 20.8x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $45.06, the analyst price target of $57.95 is 22.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.