Las Vegas Sands is perfectly placed to maintain its standing as Asia’s dominant market leader in the integrated resort space thanks to the expansion of its Macau and Singapore properties and strong position in Japan.
The assessment formed the key takeaway of a note issued by brokerage Bernstein on Thursday, which points to the sheer scale of the company’s offerings in both markets as a competitive edge it won’t be losing anytime soon.
Describing LVS as “principally an Asian gaming company” these days, given that it derives more than 90% of its profits from Macau and Singapore, Bernstein’s Vitaly Umansky, Eunice Lee and Kelsey Zhu believe that room inventory sets LVS apart now and will continue to do so well into the future.
That’s despite an expected 7% annual increase in the number of hotel rooms in Macau between 2019 and 2021 of which none will be provided by LVS’ 70%-owned local subsidiary, Sands China.
“In Macau, Sands controls approximately one-third of the hotel room inventory,” the analysts write. “With Macau gaming being a supply-driven (and hotel room supply constrained) market, Sands has developed a strong foothold in the mass market segment.
“In the past, while Sands China has had quantity in rooms, it has fallen short of having competitively high-quality rooms and high-end suites (compared to some other operators).
“However, Sands is now not only adding capacity, but also redeveloping/upscaling its properties. When the redevelopment is complete, Sands will stand to benefit from the expected growth in premium mass gaming segment in Macau.”
Sands China’s current Macau redevelopment plans include the transformation of SCC into The Londoner Macao – which will see the 1,200 room Holiday Inn converted into a 600 all-suite hotel – plus the addition of two more all-suite hotels via the 370-suite London Tower Suites and 2,909-suite Grand Suites at Four Seasons.
Bernstein says that, “While Sands will see virtually no increase in net rooms, the redevelopment of Sands Cotai Central and the opening of the Four Seasons Tower Suites will significantly increase Sands’ product offering to better appeal to premium customers.”
In Singapore, both LVS at Marina Bay Sands and its only competitor in the market, Genting Singapore’s Resorts World Sentosa, will invest US$3.3 billion to upgrade and expand their current facilities.
Even so, following the completion of the planned expansions, “MBS will continue to have an advantage over Resorts World Sentosa in number of hotel rooms and gaming features (gaming tables and slot machines), coupled with better operational and execution ability, and perpetuate its lead in market share.”
As for Japan, LVS recently cast some doubt on whether it will pursue an IR bid given that expected costs to develop in a major city are now exceeding US$10 billion. However, should the company bid, Bernstein describes Japan as an opportunity that “provides an attractive long-term optionality for LVS in an oligopoly market.
“The Japan market will likely surpass the size of Singapore and LVS is well positioned as a front-runner in the race for an integrated resort development,” the analysts said.
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