JP Morgan cuts LVS 4Q forecasts, flags uncertainty over high-end recovery

JP Morgan Securities LLC has lowered its earnings forecasts for Las Vegas Sands Corp (LVS) following the casino group’s third-quarter results, saying it remains unclear how quickly high-end gamblers will return to its properties in Macau and Singapore. The institution said the Marina Bay Sands complex in Singapore provided the larger negative earnings surprise, although an unusually low mass-market table hold rate also weighed on the property’s performance. JP Morgan cut its fourth-quarter adjusted property EBITDA forecast for Las Vegas Sands by 4 percent, to US$1.26 billion. It lowered its corresponding estimates for 2027 and 2028 by approximately 2 percent each, to US$5.06 billion and US$5.15 billion respectively. Las Vegas Sands had “high-end blues” in its gaming business in Macau and in Singapore in the three months to September 30, wrote analysts Daniel Politzer, Samuel Nielsen, and Michael Hirsh in a Wednesday note. At Marina Bay Sands, mass-market play was hurt by “low, circa 19 percent mass hold,” they added. In Macau, the group operates casinos via its Sands China Ltd unit. Las Vegas Sands saw quarterly net income dip 27.4 percent year-on-year, to US$304 million, according to a Wednesday company filing in the United States. Group-wide third-quarter adjusted property earnings before interest, taxation, depreciation and amortisation (EBITDA) were just under US$1.12 billion, down 16.7 percent year-on-year. “Las Vegas Sands’ downside third-quarter result reflected softness among its high-end players in both Macau and Singapore,” noted JP Morgan. It observed that on a hold-adjusted basis, Macau EBITDA of US$518 million was “similar” to the bank’s forecast of US$529 million, which in itself had been lower than market consensus of US$541 million. “The bigger downward surprise was that Singapore’s US$594 million” in hold-adjusted EBITDA for the third quarter was “13 percent to 14 percent below the bank’s and consensus” of between “US$680 million and US$685 million”. JP Morgan also stated: “While we think investors were positioned for misses across both segments, it’s worth noting that Singapore was adversely impacted by low, circa 19 percent, mass hold.” The institution added: “Adjusting for this, Marina Bay Sands’ EBITDA may have been closer to circa US$635 million.” The bank said it chose to “interpret” certain management comments in the third-quarter earnings call regarding “‘a bunch of things going on globally that may have [had] an impact on visitation,’” as “pertaining to… the Chinese government’s offshore tax campaign”. It had a deadline of Thursday (October 22) for payments to be made. The bank added: “It’s unclear how quickly high-end gamblers will return to Macau/Singapore.” JP Morgan observed: “Combined with the challenging macro[economic] backdrop in China, not much is working in Las Vegas Sands’ favour right now. “Operationally, Las Vegas Sands believes its Macau promotions and operating expenses/service levels are pretty much where they want them to be, but for margin expansion and/or EBITDA growth, market GGR [gross gaming revenue] will need to grow.” The bank noted that as the casino group “waits for the backdrop to improve, it’s aggressively repurchasing stock,” citing US$950-million worth in the third quarter. JP Morgan said the company’s US$5-billion share-purchase authorisation was “sizeable” relative to the circa US$10-billion market value of its outstanding float, “potentially putting a floor under the stock”. The note also highlighted a combined US$600-million increase in Las Vegas Sands’ capital expenditure plans for 2027 and 2028, bringing the respective annual totals to US$1.95 billion and US$2.60 billion. “Macau [annual] capex is now expected at US$750 million,” i.e., up US$150 million per year; consisting of renovation work to The Venetian Macao, and to Conrad Macao at The Londoner Macao, as well as a “hotel rebrand” on the Conrad property, and work on the “botanical garden concession project”. JP Morgan observed that in Singapore, capex was now expected at US$200-million per year, i.e., up US$100-million per year on prior estimates.