Las Vegas Sands Upgraded to Investment-Grade by Fitch

Fitch Ratings once again awarded Las Vegas Sands (NYSE: LVS) an investment-grade credit rating. The research group mentioned Sands' two operating markets, Macau's recovery and Singapore's general strength.

Based on those indicators, Fitch noted that LVS used the ratings agency's "upgrade sensitivities" to drive leverage. About eight months after Standard & Poor's (S&P) became the first of the three main credit research agencies to restore the gambling company's investment-grade rating, Sands has now been given a "BBB-" rating with a "stable" outlook.

"Fitch believes the pace of recent growth in Macau should allow LVS to continue to remain at investment grade metrics given the company’s strong position in the premium mass market, along with positive free cash flow generation and strong liquidity,” noted the research firm.

The six concessionaires in Macau, including Sands China, earned $2.4 billion last month, a 67% increase from the previous year. With five casino hotels, Sands China is the biggest operator in the Special Administrative Region (SAR).

Large Projects Can Be Funded by Sands

In the fourth quarter, LVS invested $325 million in improving Marina Bay Sands and its Macau properties, among other costs. According to Fitch, the operator can manage more extensive expenditures, such as a potential integrated resort in New York, without jeopardizing its financial stability.

“LVS has a potentially heavy capital program, especially if it wins a New York City license, but Fitch believes the company is able to meet this funding without materially affecting the balance sheet,” according to the ratings agency. “The rating also reflects potential weakness in the China economy, regulatory changes, and an increasingly competitive environment in Macao from new openings and expanded facilities.”

Sands had access to $4.44 billion on a revolving credit facility and $5.11 billion in cash on hand at the end of the fourth quarter. By the end of 2023, the gambling company owed $14.01 billion. Its closest debt maturity is August, when $1.75 billion in unsecured notes are due.

“Fitch believes LVS is willing to manage its balance sheet in a manner consistent with investment grade ratings, and the company has a solid track record of publicly articulating its leverage policy and adhering to prudent balance-sheet management,” added the research firm. “Management has stated a gross target debt ratio of 2.0x-3.0x before the impact of development projects.”

Singapore and Macau Can See Further Development

While the premium mass segment is dominating in Singapore, Marina Bay Sands, one of the most lucrative integrated resorts in the world, is already setting records among mass market bettors.

The fact that, despite the fact that casinos in Macau and Singapore are doing well, Chinese travel to these areas is still below pre-coronavirus pandemic levels is crucial to the prognosis for Sands' credit profile and stock. That suggests that there is more space for development.

“Despite the rapid growth in gaming revenues, visitation and airline capacity remain below 2019 levels, and the rebound in those metrics should provide another source of further revenue growth over the near term,” concluded Fitch. “In addition, capital improvements, particularly at The Londoner, should further drive long-term growth for LVS.”