In an ironic twist, Las Vegas Sands (NYSE: LVS) is selling its Las Vegas properties to Apollo Global Management for $6.25 billion. This will include the Venetian Resort, convention center, and other real estate holdings.
Reportedly, the deal was in works for months as Sands' revenue and focus has shifted away from Vegas. However, it follows another seismic shift for the company as founder and largest shareholder, Sheldon Adelson passed away in January.
Adelson started building his fortune in the 1970s with trade shows for personal computers in Las Vegas. Due to the trade show's popularity and profitability, he invested in hotels and real estate in the area. As the PC industry took off and Vegas became a business and family-friendly destination, Adelson's tidy nest egg turned into a fortune with hotel, convention center, and occasion holdings.
Deal Details
Many believe that Las Vegas Sands got a good price for its Vegas holdings. $6.2 billion is 12.8 times its 2019 earnings before interest, taxes, depreciation and amortization. This is a fair price for this type of asset but more so given the pandemic's conditions and forecasts that Las Vegas Sands' revenue won't reach 2019 levels until 2023.
As of the last quarter, Las Vegas accounted for 9% of the company's revenue with the bulk coming from Asia. Currently, the company's two largest holdings are in Macau and Singapore. So, it makes sense that the company is going to focus its efforts on these properties.
Demographics are favorable as well as these countries have younger populations and tend to gamble more than Vegas-goers. In fact, many believe that Vegas may have peaked in travel volume especially with so many cities around the country building casinos and states legalizing online and sports gambling.
Stock Price Outlook
Las Vegas Sands' stock is about 15% from it's all-time high. In recent weeks, it's been an outperformer with increasing optimism about vaccinations and increasing travel. The bull case for Las Vegas Sands centers around this boom in travel that should result all around the world as restrictions are lifted. Other potential catalysts are that the company may look to move into online gambling, sports betting, and regional casinos in New York or Texas,
There is also a major risk worth highlighting. Sands' casino license in Macua is set to expire in 2022. Failing to get re-approved would be a disaster for the company, and this risk is certainly present given tensions between the U.S. and China.