Maintain HOLD call and SGD0.83 DCF-based TP
Las Vegas Sands (LVS US, CP: USD44.12, Not Rated) reported 4Q21 results with Marina Bay Sands (MBS) generating better results QoQ despite elevated numbers of new COVID-19 cases. While MBS’ results are not as good as those reported in 1Q21, 2Q21 and pre-COVID-19 times, we still welcome them as a good portent that GENS’ earnings troughed in 3Q21 (core net profit: SGD26m) and ought to recover a tad in 4Q21. We maintain our earnings estimate, HOLD call and SGD0.83 TP on GENS.
MBS 4Q21 EBITDA of USD177m (adjusted: c.USD75m)
MBS generated 4Q21 EBITDA of USD177m (+23% YoY, +1,080% QoQ). That said, the results were buoyed by a high VIP win rate of 6.3% and USD70m of bonus reversals and Jobs Support Scheme payments. Adjusting for them, 4Q21 EBITDA would have come in at c.USD75m which is still a marked improvement from 3Q21 EBITDA of USD15m. To be sure, it would still be lower than the 1Q21 and 2Q21 EBITDAs of USD144m and USD112m respectively.
4Q21 operating metrics recovered QoQ
This is due to all 3 gaming volume parameters (VIP volume: +187% QoQ, mass market table drop: +28% QoQ, slot handle: +25% QoQ) recovering QoQ despite elevated numbers of new COVID-19 cases in Singapore in 4Q21. By extension, we hope GENS will report similar trends in its upcoming 4Q21 results on 17 Feb 2022. With the number of new COVID-19 cases in Singapore surging again, we hope that the 4Q21 operating metrics can be repeated in 1Q22.
MBS 2.0 to go ahead despite on-going pandemic
Despite the on-going COVID-19 pandemic, LVS stated that MBS will go ahead with an USD1b renovation that will expand its room inventory (current: >2,500) which will be over and above its SGD4.5b ‘MBS 2.0’
reinvestment programme. In our view, this may compel GENS to do the same with its SGD4.5b ‘RWS 2.0’ reinvestment programme despite the ongoing COVID-2019 pandemic.