Sands China: Stock of the Week

The luxury resort provider is looking to lure tourists to Macau – via London!

Kate Lin 30.05.2023
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Kate Lin: As the China economy reopens, various sectors like travel and tourism seem to be recovering, though numbers are still not back to pre-pandemic levels.

Take Macau, for example. The city, which has a population of 700,000, welcomed nearly 5 million tourists in the first quarter of 2023. While this may seem like a lot, it is half of what it was before COVID.

Enter our Stock of the Week, Sands China (01928), which is looking to lure tourists back to its casinos and hotels. The company added yet another luxury resort to its roster, The Londoner Macao, which features a replica of the Big Ben. With this and its two other Europe-themed properties, the Venetian and the Parisian, Sands China is targeting the rising demand from the premium mass segment.

Our analyst Jennifer Song believes that the addition of the Londoner Macao will help the company defend its market share from its biggest competitor, Galaxy Entertainment (00027), which has expansion plans  of its own underway. Song is keeping Sands China’s 2023 revenue forecast at US$ 5 billion, or 58% of 2019 levels.

Shares in Sands China almost doubled over the past seven months, putting the stock in a three-star price range. Our analysts anticipate that as more tourists return to Macau and tourism traffic continues to recover, the share price is likely to be supported in the near term. 

For Morningstar, I am Kate Lin.

 

bulls Bulls Say

  • Sands China is well positioned to benefit from China's reopening, which will allow the company to restore its profitability meaningfully from 2023 onward.
  • Sands China is Macao's largest integrated resorts operator. It will continue to possess the highest room count after Galaxy Phase 3 and Phase 4 open, which will likely bring strong traffic to the group's casinos and other nongaming area.
  • Sands China is dedicated to strengthen its positioning in the premium mass business, which will help it to capture more upside during economic recovery.

 

bears Bears Say

  • Sands China will still face harsher licence-renewal terms such as shorter licence duration, a requirement of nongaming investment, and 1% increase in gaming tax.
  • Stricter enforcement of government policies, such as visa restrictions, visitor caps, antigraft campaigns, or a smoking ban, could have a significant adverse impact on Sands China.
  • Increasingly stringent regulations, such as junket regulations, will hurt revenue and profitability of Sands China.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Sands China Ltd Shs Unitary 144A/Reg S17.98 HKD1.35Rating

About Author

Kate Lin

Kate Lin  is an Editor for Morningstar Asia, and is based in Hong Kong

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