Las Vegas Sands (LVS) is looking to sell its two hotel-casino properties on the Las Vegas Strip, as casinos and convention centers remain largely closed as the pandemic drags on. LVS stock fell, with other casino stocks falling further.
A Sands spokesman confirmed that discussions have taken place, though nothing has been finalized, according to multiple news reports.
Las Vegas Sands CEO Sheldon Adelson is working with an advisor to field interested buyers, according to Bloomberg. Sale of the Venetian Resort, the Palazzo and the Sands Expo Convention Center could net $6 billion.
“If LVS goes forward with these reports then they would no longer have a U.S. presence, despite being an S&P 500 company,” wrote Wolfe Research analyst Jared Shojaian in a report. “LVS has remained consistent that returns are greater in Asia where there is also more growth, and Vegas has not been a core part of LVS’s business at only 9% of 2019 EBITDA.”
A sale would mean the company’s remaining properties would be concentrated in Asia, namely in Singapore and Macau. Sands’ U.S. business was already a fraction of its total operations at 15% of revenue last year. Its five resorts in Macau, the world’s biggest gambling market, generated 63% of the company’s $13.7 billion in revenue.
But Covid has devastated the casino industry. Last week, Sands reported Q3 revenue of $586 million, an 82% decrease from the prior-year quarter. It lost 67 cents a share vs. a 75-cent-a-share profit in the same period last year.
Las Vegas Sands Stock
Shares fell 1.7% to 48.29 on the stock market today on news of the potential sale. Shares initially rose but hit resistance at their 200-day line.
The consolidation is part of a much-larger pattern.
The relative strength line recently hit its worst level since the end of 2009, reflecting LVS stock’s underperformance vs. the S&P 500 index.
Casino Business Outlook
Adelson said in an earlier statement that “the recovery process from the Covid-19 pandemic continues to progress in each of our markets.”
While Las Vegas has reopened, the conventions that bring throngs of daily visitors have been few. In August, total visitor volume dropped 57% when compared with the same month last year, according to the city’s tourism department. In August MGM Resorts laid off 18,000 employees, about a quarter of its workforce.
A slow recovery in Asia improved Sands’ quarterly earnings. China has gradually lifted travel restrictions and created a travel bubble with the gambling hub. Still, mainland Chinese visitors during China’s Golden Week holiday in early October were down 84% from a year earlier, according to China’s tourism department.
Analyst Shojaian said possible buyers for Sands’ properties could include private equity firms. “Specifically Blackstone, given their existing exposure and interest in Vegas real estate,” he said in a note. “We think gaming REITs, particularly MGP or VICI, could also have interest.”
He added it’s not likely a competitor like MGM would step in.
“We’re not sure who wants the operations in this environment as cash burn at an Op-Co level seems likely to us for at least the next 12 months,” he wrote. “It probably would not be well received if MGM bought the operations, even though there are likely nice synergies over the longer term.”
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