Las Vegas Sands to boost ownership stake in Sands China unit

Las Vegas Sands to boost ownership stake in Sands China unit

Making a significant strategic move, NYSE-listed Las Vegas Sands Corporation has announced that it has plans to bolster its ownership stake in the Sands China unit, the gambling-friendly entity that oversees five high-profile integrated resorts (IRs) in the thriving casino market of Macau. The plans involve the Las Vegas-based casino giant's decision to secure $24.31 million worth of equity in Sands China, which will consequently enhance its ownership stake from 70 per cent to 71.19 per cent.

The American casino operator’s decision to increase stake in the Sands China unit has arrived amidst a challenging market environment for Macau concessionaires. In spite of a consistent uptrend in the region's gross gaming revenue (GGR) thus far this year, stock valuations for casino companies have remained on a downward trajectory, presenting an intriguing divergence between market perception and the actual performance of the former Portuguese colony’s gaming sector.

The strategic decision of equity purchase in Sands China also points towards the company's confidence in the underlying value of Sands China shares. Analysts have observed that despite Macau casinos' positive revenue growth, stock prices for the gaming operators, including Sands China, are still undervalued. This provides investors with a unique opportunity to invest. JPMorgan analysts have recently highlighted the potential for significant returns based on cash flow metrics for operators like MGM, Wynn, and Melco.

Remarkably, Sands China stands out among Macau concessionaires as it has showcased relatively better business performance in spite of the market's undervaluation trend. According to JPMorgan's analysis, while stock valuations of Sands China might not solely dictate market movements, oversold stocks in the gaming sector offer a good opportunity for investors due to their potential for significant returns in the future.

Furthermore, analysts have highlighted connections between Macau's mass gaming revenue and various factors such as visitation and spending at the gambling-friendly properties in Macau. Sands China's dominance in the mass and premium mass segments positions the company positively to take advantage of on potential growth in these areas. Markedly, these segments are already showing promising signs of recovery toward pre-pandemic levels, with revenue growth forecasts expected to materialize in 2024.

Thus, Las Vegas Sands' decision to bolster its ownership in Sands China not only reflects its confidence in the future potential of Macau's gaming market but also positions the company strategically to benefit from the region's anticipated growth.

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