Breakingviews - It’s time for Sheldon Adelson to leave Las Vegas
HONG KONG (Reuters Breakingviews) - Sheldon Adelson’s Las Vegas Sands is doubling down on Asia. The $37 billion casino operator may sell U.S. assets for $6 billion, which it can use to build its footprint in the faster-growing region. That would thin its hedge against rising risks in Chinese Macau. But the Nevada market is saturated, and a marginal contributor to revenue. Sands could use the cash for other things.
Asia already accounted for some 90% of Sands’ $5.4 billion adjusted property EBITDA last year, before the pandemic struck, according to its latest annual results. Growth prospects look rosier there, thanks in part to middle-class Chinese punters, barred from playing at home, who are travelling as far as Australia to gamble. In the United States, gamblers are spoiled for choice, which makes growth a challenge. Nine out of 10 Americans lives within an hour’s drive of a casino, according to Credit Suisse.
Sands does have an overdependence on China. With the borders effectively closed, the Macau business flipped to a $478 million loss in the first nine months of 2020. Beijing’s policy changes can have a big impact too. The concession comes up for renewal in 2022, and if U.S.-China relations sour further, Adelson’s close relationship with President Donald Trump make his renewal application a tempting target for retaliation.
But there are other hedges besides Vegas. Singapore, for example, is a gateway to Southeast Asia, offering a route to diversifying the customer base. The Marina Bay resort was the only Sands property to turn a profit in the first nine months of 2020. Sands already plans to invest another $3.3 billion in its resorts there. There are also potential opportunities in countries like Japan and Vietnam.
If Sands can secure the $6 billion it is seeking for the Las Vegas unit, as reported by Reuters, it could strengthen its strained balance sheet, with some left over for an M&A war chest. A distressed company like Australia’s Crown Resorts would be within reach, with an enterprise value of around $3.5 billion, according to Breakingviews calculations.
A diversified Asian strategy could pay out better for Las Vegas Sands’ investors than Las Vegas itself. But the company will need a new name.
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