Las Vegas Sands (LVS): Sell Now, Needs Cash

The recent woes hitting Las Vegas and gaming stocks like Las Vegas Sands (LVS) are welldocumented. But Bank of America isn’t ready to call the bottom.

LVS hit its 52-week low of about $30 in mid-July and has rebounded to above $40. However, BofA analyst Shaun C. Kelley expects that gain to soon be erased because of the company’s high valuation, economic headwinds, and, primarily, its needs for additional funding across the organisation:

LVS needs money at each of its 3 subsidiaries: U.S., Singapore and Macau. With [CEO] Adelson’s backstop, funds are available but would be expensive/dilutive from any other source. Regardless, we think the margin for error is lower.

1. Need cash in the U.S. starting in Q3 due to covenants. Due to a 7.5x leverage covenant, we estimate LVS needs ~$1.2B in the U.S. over the next year to not violate its covenant and to finish its pipeline (PA/LV).

2. Need cash in Singapore due to 20% equity requirement. LVS needs ~$400M in Singapore from the U.S. or needs to raise additional debt given it is required to have 20% equity to draw down on its revolver. Needs would be higher if the $4.5B budget is increased for any reason.

3. In Macua, if the targeted financing falls short or the current projects go meaningfully over budget, funding could prove tight as well given the lack of available resources in the U.S.

Bank of America downgrades Las Vegas Sands (LVS) from Neutral to SELL, target cut from $43 to $30.

See Also:
Starbucks (SBUX) Leaving Las Vegas: Sign of Bottom For Las Vegas Sands (LVS)?
Citi: Don’t Go Near Las Vegas Sands (LVS) or Gaming Industry
Las Vegas Sands (LVS), WYNN Casinos (WYNN), et al: Worst Yet To Come

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