In a bold yet potentially astute financial maneuver, Las Vegas Sands has declared its intent to fortify its grip on Sands China, the renowned architect behind the glimmering resort skyline of Macau. Through the veils of corporate structure, utilizing a subsidiary dubbed Venetian Venture Development Intermediate II, a sum of $24.31 million will transition into equity in Sands China. This strategic purchase secures an additional 96,600,247 shares, nudging Las Vegas Sands’ ownership from a commanding 70% to a staggering 71.19%.
The decision, subtly released in a filing to the Hong Kong Stock Exchange, could be seen as a shrewd response to the current fiscal landscape. Despite the regal and bustling casinos of Macau rebounding with vigour, an inexplicable dampening of Macau concessionaires’ share prices pervades the market. Even as the gaming industry’s lifeblood—the gross gaming revenue—climbs upwards, the strength of the shares hasn’t followed suit.
With six major players in the arena, all but MGM China brace against a 20% or higher decline in their stocks since the start of the year, despite Macau’s doors reopening and travel restrictions easing. Sands China, well-positioned as the third-best performer among its peers, still faces a 22% dip in valuation.
Analysts, including those from the financial titan JPMorgan, issue their conjectures wrapped in cautious optimism. The undervaluation, they argue, is both a quandary and an opportunity. The undulating flow of free cash and debt repayment, by their calculations, could spawn a 15% per annum return on equity—a figure not to be scoffed at in such uncertain times.
Factoring in the future, the forward-thinkers and number crunchers agree—Sands’ play might just be prophetic. Analyst projections point towards swelling revenue streams for Macau’s casino titans as the year 2024 approaches. And it is not the towering might of China’s GDP that anchors Macau’s gross gaming revenue; rather, it is the confluence of visitor numbers, gambling expenditures, and the time patrons dedicate to the embrace of the casinos.
Diving deeper, it is the mass and premium mass market segments that have rapidly rebounded, closely reaching the thriving levels pre-pandemic—a sector where Sands China undoubtedly holds sway. With such insights, the increased equity secured by Las Vegas Sands is not just a mere expansion of portfolio but a staunch belief in the recovery and dominance of its Chinese enterprise—a testament to the resilience and allure of Macau’s gaming cosmos.
