Las Vegas Sands Could Deploy Venetian Sale Cash in Variety of Ways, Say Analysts

By | March 3, 2021

Las Vegas Sands (NYSE:LVS) confirmed today it’s selling the Venetian Resort and Sands Expo and Convention Center on the Strip to Apollo Global Management and VICI Properties for $6.25 billion. Analysts are now opining about what the gaming company will do with the influx of cash.

Sands Sale
Sands Convention Center and the Palazzo on the Strip. Analysts are discussing what the company will do with cash from the sale of those assets. (Image: Las Vegas Review- Journal)

The news ends months of speculation regarding the fate of the venues and is generating buzz on Wall Street regarding how the operator will invest the capital. Investments in Asia, other parts of the US, dividend restoration and sports wagering are among the topics analysts are tossing around today.

At this point we think LVS will be keeping more dry powder as there could be domestic opportunities on the horizon in ‘new’ gaming markets like Texas or New York,” writes Stifel analyst Steven Wieczynski. “They might also be keeping dry powder in case larger capital investments are needed in their Asian gaming markets especially around the Macau concession renewal process that should start next year.”

Sands has long had interest in bringing an integrated resort to New York. More recently, the company spent millions on lobbying efforts in Texas with hopes of opening a gaming venue in the second-largest state.

As Wieczynski points out, Venetian and Palazzo on the Strip generated just $487 million in earnings before interest, taxes, depreciation and amortization (EBITDA) in 2019 — nine percent of Sands’ total — meaning it’s possible the company directs some of the sale proceeds to enhancing some of its five Macau properties or Marina Bay Sands (MBS) in Singapore.

Other Ideas for LVS Cash

The Stifel analyst say it’s a “maybe” that LVS uses some of the capital from the Venetian transaction to reinstate its dividend. The company suspended the payout last April amid the coronavirus pandemic crimping its bottom line – something late Chairman and CEO Sheldon Adelson was loathe to do given his fondness for dividends.

Macquarie analyst Chad Beynon says it’s possible that the company will continue mulling entry into rapidly growing US iGaming and sports betting segments. Speculation to that effect intensified in January following Adelson’s death. He stridently opposed online gaming, saying it leads to higher rates of addiction and large losses for bettors.

Conversely, Morningstar Dan Wasiolek analyst sees LVS’s sale of its Las Vegas assets as a possible hindrance to its domestic sports betting ambitions.

“Mitigating our favorable view is our thought that this sale removes an opportunity for the company to compete in the expanding U.S. sports betting market,” he wrote in a note today. “And although Las Vegas Sands can still develop a mobile presence or partner with an existing operator, the aggressive investments made in the space by no-moat peers MGM and Caesars have positioned them to lead in U.S. sports betting.”

Good News for Rivals

While it’s arguably impressive LVS was able to fetch $6.25 billion for Venetian and Palazzo given the properties’ low 2019 EBITDA contributions and depressed valuations on gaming real estate due to the pandemic, there’s some favorable news in this deal for rivals.

Morgan Stanley analyst Thomas Allen points out that as Apollo takes control of day-to-day operations at Venetian and Palazzo, those venues will have less of connection to Sands’ Macau integrated resorts and MBS.

That reduced relationship could benefit MGM Resorts International and Wynn Resorts — the other Strip operators that also run gaming venues in Macau — says Allen.

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