Las Vegas Sands Macao Recovery Likely To Continue in 2023–24, but Shares Are No Longer Cheap

Las Vegas Sands’ shares jumped 5% after hours after its fourth-quarter update showed Macao (66% of 2019 EBITDA) demand recovery in January after the removal of COVID-19 restrictions on Jan. 8. We maintain our long-held constructive view on the company’s leading regulatory edge (the source of its narrow moat) in Macao and Singapore (34% of 2019 EBITDA). We still expect Macao’s industry gaming recovery to recover to 50% and 90% of 2019’s level in 2023 and 2024, respectively, up sharply from the 14.4% posted in 2022, which could continue to provide a catalyst for shares. Nevertheless, we no longer view shares as undervalued after the 60%-70% appreciation seen from the lows posted in both 2021 and 2022, resulting in a 16 times forward-year EV/EBITDA multiple (12 times on 2024 estimates), versus the 12 times forward-year multiple received prepandemic. We don’t plan to materially change our $49 fair value estimate.