Casino stocks rallied on Thursday after Las Vegas Sands Corp. executives predicted a quick rebound in gambling among the company’s properties across Asia and said it is seeking to use its cash for acquisitions.
Las Vegas Sands (NYS:LVS) surged 12% in Thursday trading, closing at $45.79, which is the largest percentage increase since Nov. 1, 2018, when shares jumped 11.8%. Wynn Resorts Ltd. (NAS:WYNN) rallied 8.6% Thursday, MGM Resorts International (NYS:MGM) climbed 3.7%, and Melco Resorts & Entertainment Ltd. (NAS:MLCO) shares gained 5.9%.
Sands executives said on the company’s earnings conference call late Wednesday that they believed demand would rebound more quickly in Asia versus the U.S. in part because their customers are more accustomed to wearing face masks, having their temperature taken and other precautionary measures because of past epidemics in the region.
“I don’t think the Asian people have a problem at all,” Chief Operating Officer Robert Goldstein said on the call. “In fact, I think they’re going to welcome it and be anxious to get back to having fun. I believe that from the bottom of my heart, the recovery in Asia is going to happen rather quickly. I’m not as comfortable [about] Vegas."
Sands Chief Financial Officer Patrick Dumont said that the company is “pretty confident” that the business will be in better shape this summer and in a “much better place” by the fall. “We have seen evidence of pent-up demand like crazy from our customers, who are asking when, and we talk to them pretty regularly,” he said. “So we feel pretty good about the return in Macau. Far, far beyond what we’re going to see in the U.S.”
Wynn and MGM also operate properties in Macau.
JPMorgan analyst Joseph Greff upgraded Sands to a buy with a $52 target price Thursday, saying that his team forecasts travel restrictions lifting in Macau in the next two months, Sands’ liquidity and that expectations for the casino operator were low.
“Overall, we view LVS as a way to play what should be improving [gaming group] trends in Macau, a gaming/travel dependent market that experienced the COVID-19 downturn first and should experience a bounce/recovery earlier, at least in relation to potential recoveries in U.S. regional gaming, Las Vegas Strip, and U.S. business travel lodging markets,” Greff wrote in a note to clients Thursday.
For Sands’ Macau operations, Chief Operating Officer Robert Goldstein said social distancing will have a minimal impact because of the amount of square footage of its properties there and numerous table slots.
In the earnings call, Dumont said Sands can continue to operate with close to zero revenue and continue to develop its existing plans in Macau for roughly 18 months with its current resources.
“If, for some reason, we felt like we needed access to the capital markets, we spent a lot of time working to ensure that we had access to the most deep and most liquid market in the world, which is the high-grade bond market,” Dumont said. “And so as an investment-grade company, the investment-grade bond market opened very quickly, after the impacts of coronavirus hit the capital markets.”
Executives also discussed the possibility of using its balance sheet to make acquisitions of either specific assets or entire entities if appropriate. Nomura Instinet analyst Harry Curtis said in a client note that it was the most “surprising” aspect of the conference call. “The read-through on Macau alone should be positive for [Wynn’s] stock, as well as other gaming operators with high quality assets such as [Melco Resorts & Entertainment],” he wrote. Curtis rates the stock a buy with a $57 target price.
Macau authorities suspended casino operations for 15 days starting Feb. 5, but business remains constrained there, Las Vegas Sands executives said. Travel restrictions, such as suspended ferry services, combined with canceled tours and quarantine requirements have curtailed business there.
In his note Greff wrote that Macau Chief Executive Ho lat Seng gave a recent address stating that the pandemic was over and was working with authorities in China to begin issuing visas, though it was unclear how quickly adjustments to travel restrictions would take effect.
In Singapore, where Sands operates another casino, the government suspended gaming operations from April 7 through June 1, which could be extended, executives said.
Sands’ Las Vegas operations have been suspended through April 30, though the city’s mayor has pushed for casinos to reopen as soon as possible, despite the outbreak.
Sands reported first-quarter results late Thursday, including revenue that fell 51.5% to $1.78 billion from $3.65 billion a year ago. The company has also suspended dividend payments.