Seaport: Sands may resume dividends in 2025

Seaport: Sands China eying dividend resumption in 2025

by Ben Blaschke Mon 26 Aug 2024 at 05:52
www.asgam.com/index.php/2024/08/26/seaport-sands-china-eying-dividend-resumption-in-2025/

Macau concessionaire Sands China will most likely resume the payment of dividends in 2025 – a year earlier than many analysts had anticipated – although the scale of such dividends will be dependent on the company’s performance upon completion of The Londoner Macao revamp.

The update was provided by executives of parent company Las Vegas Sands (LVS) at the 2024 Seaport Annual Summer Conference, which saw Seaport Research Partners host LVS and other gaming companies for the benefit of investors.

According to Seaport’s Senior Analyst Vitaly Umansky in an ensuing note, dividends remain high on the company’s priority list, stating, “Hong Kong investors like dividends, so [it] makes sense to restart some dividends at Sands China.”

Sand China is one of three Macau companies yet to resume the payment of dividends post-COVID, alongside Melco Resorts and SJM Resorts – largely because of the company’s significant investment into The Londoner Macao. The Phase 2 revamp has seen both the Sheraton and the old Pacifica casino floor closed for renovations since early in 2Q24 which Sands China previously said materially impacted its Q2 results.

In providing its latest update to investors, LVS said Macau’s Q3 results should be largely in-line with Q2 due to a full quarter of disruption at The Londoner, albeit offset by what it expects to be stronger summer business.

“The Londoner will have 2,500 rooms offline for redevelopment in Q3 compared to ~1,200 in Q2, but the quarter-on-quarter impact on revenues should not be as severe as room reduction implies,” Umansky wrote.

The company expects to reopen the old Pacifica Casino as well as the Sheraton – to be renamed Londoner Grand – by December.

Separately, Sands China told investors during the 2024 Seaport Annual Summer Conference that player reinvestment – a hot topic in Macau in recent months as market competitiveness heats up post-COVID – had been “too high” in Q2 and more specifically that such costs had negated the benefit, according to Umansky.

“Reinvestment is coming down in Q3 (in fact it started coming down in late Q2 compared to earlier in the quarter), and should see further reduction in Q4 – all based on reinvestment as a percentage of mass,” he wrote, adding that base mass revenues continue to disappoint even while premium mass soars.

Sands China is “seeing both lower visitation and lower spend per customer in this segment,” the Seaport analyst explained. “Softness is attributable to China’s economy and constraints on customer income and wealth (middle-class of China). Until the China economy and consumer confidence improves, base mass is not likely to see a stronger recovery.”

Conversely, “The crackdown on the illicit Macau money exchange rings is not having any material impact on revenues. Not many players rely on such liquidity, and alternatives exist.”

The key question, then, is what would a dividend resumption do for the LVS stock price multiple?
Any of our statistically adept participants want to take a shot at that?