Sands: “Awful and apathetic”; Sheldon’s deep pockets

Also, October is predicted to be “not as bad as feared.” True, gaming revenue is tracking 75% below last year but weak VIP play seems to be the culprit. Throwing caution to the winds, Macanese operators are opening side-by-side gambling tables, abandoning anti-Covid protocols. “We note the past week has seen a steady improvement in volumes, which looks to be the result of China offices opening up and visas starting to be issued in a more normal manner, albeit with longer processing times and some anecdotal reports of roadblocks for here and there.”

After listening to Sands management, Greff posited that the company’s Macao flotilla and Marina Bay Sands were on the “cusp of more meaningful positive inflections.” Adelson and his lieutenants assured analysts that “recent Macau trends have been encouraging, with meaningful improvement in business volumes in the premium mass segment leading its (nascent) recovery. To us, this indicates that VIP junket liquidity issues aren’t negatively impacting the important premium, higher-end mass segments.” Sands is reporting positive cash flow from Macao, despite credit issuance being only 30% of last 3Q’s. It is much the same for Marina Bay, which is being propped up by locals business, with a reopening to international visitation on the horizon. Premium retail stores in Sands’ Macao Four Seasons are also seeing higher business than at this time last year.

Greff was so psyched he raised his cash-flow projections for Macao by 35%, even as he lowered them 16% for Adelson’s Las Vegas Strip casinos, “as we expect a slow recovery for convention traffic,” not until 2022. The Vegas properties were also dogged by 10% less table-game wagering and 19% lower slot revenue. Greff spun these as “better than feared” but it doesn’t sound great to us. The third quarter was a near-total write-off in Macao, with gaming revenue down 95%, with 90% less VIP play. Capital improvements at The Londoner (formerly Sands Cotai Central, which sounds like a scrap yard) and Marina Bay remain on course, although the Covid-19 crisis has moved back the Marina Bay expansion by one year. At the Four Seasons, new luxury suites “should drive premium mass and junket business while the Londoner will benefit from additional gaming space and 370 new luxury suites.” In a speedy flip-flop of sentiment, Greff saw his former $57/share price target and raised it a buck.

Credit Suisse analyst Ben Chaiken also reported a surfeit of negative LVS sentiment, adding, “With that said, there were multiple green shoots, giving us increased confidence in a recovery in what feels like still very poor sentiment. With this in mind, Macau has taken some time to ramp, but trends since Golden Week have remained fairly strong and the tone on the call was better than what is priced into the stock currently.” Premium mass-market play, Sands’ Macanese sweet spot was reported by Chaiken to be “bright … we think LVS’ properties and retail offerings are particularly well suited to capture this audience,” perhaps as much as 60% of pre-Covid levels. Given Sands’ middle-class orientation in China, Chaiken likes its prospects more than those of Wynn Resorts or MGM China.

On Sands’ southern front, “More recently, New Zealand/Vietnam and Australia have started to loosen travel restrictions with Singapore. Incremental to that, we think the potential travel bubble between Hong Kong and Singapore could be a significant tailwind. Recall, officials in both locations recently reached an agreement to allow travel without quarantine; however, details surrounding a start date are limited. While not completely out of the woods, this quarter gives us something to grab onto and we would be adding to the stock.” He concluded that bidding for concession renewals between now and 2022 would be intense and “competitive,” though it’s difficult to see Adelson being turfed out of China after his munificent amount of investment.

Returning to the Las Vegas Strip, analyst Carlo Santarelli of Deutsche Bank reports that 3Q20 occupancy was 44% (compared to last year’s 94.5%), with average daily rates of $174 (-26.5%) and revenue per room of $76 (-66%). Even a halving of table hold didn’t help wagering numbers ($425 million), while slot coin-in tumbled 28.5% to $588 million. Venelazzo grossed $34 million at the tables and $49.5 million at the slots. Minus a hefty $24.5 million in “discounts, commissions and loyalty points” that left $59 million in net gaming revenue (-43%). Retail brought in $52 million, still down 67%. Overall, Las Vegas operations brought in $152 million (-62.5%), $167 million in Macao (-92%) and $281 million in Singapore (-64.5%). All jurisdictions except Singapore generated negative return on investment. If Wall Street is right, there are faint glimmers of hope Sands, with “faint” being the operative word. Fortunately, the company is sitting on a mountain of cash.

Speaking of which, how much is Sheldon Adelson’s hot line to the Oval Office worth? Try $75 million. That’s how much the mega-mogul is dumping into Donald Trump‘s reelection campaign (abandoning any Adelsonian pretense of being a “social liberal” in the process). The Adelson largesse represented 90% of the spending of Preserve America PAC, almost doubling Mr. & Mrs. Adelson’s $176 million in 2020 election-cycle spending. “The couple had previously given $50 million to Senate Leadership Fund, the GOP super PAC focused on defending the Senate majority. An additional $40 million in donations to the Congressional Leadership Fund, the Republican super PAC focused on the House,” reported Politico. On top of that, Shel and Miriam gave a mere $2 million to the Republican Governors Association—guess there’s not much need there—and $5 million Republican State Leadership Committee, which means they may be meddling in your local legislative race.

Compared to Adelson, other Preserve America donors are mere pikers: $5 million from Home Depot co-founder Bernie Marcus, $2 million from banker Warren Stephens and $1 million from businesswoman Diane Hendricks. While the Trump campaign tries to accentuate the positive with its campaign ads, Adelson & Co. are free to go low, in time-honored [sic] PAC fashion. Did any politician, left or right, ever run a really sleazy ad and then say “I approved this message”?