Sands' Sin City sale might fund pivot to Australia

[HONG KONG] Las Vegas Sands' Sin City sale might fund a pivot to Australia.

The casino company has cash in hand after negotiating a rich US$6.3 billion for its Las Vegas assets. Crown Resorts is an affordable addition to its Asian empire, and the group founded by the late Sheldon Adelson would be welcomed by watchdogs Down Under, too.

The mathematics makes this more attractive than other opportunities. Sands is selling out of its American casinos at a valuation of 13 times Ebitda (earnings before interest, taxes, depreciation, and amortisation) for 2019, according to Bernstein.

Meanwhile, James Packer's beleaguered business is currently valued around eight times Ebitda for the same year, setting aside non-recurring items. Although the Australian outfit boasts a brand new property and mature resorts in Melbourne and Perth, share values are pressured by a year-long inquiry that revealed lapses in governance and compliance. As a result Crown lost its operator licence in Sydney, and may yet lose licences elsewhere.

Australia's tough anti-Covid-19 measures also impede growth.

Sands could do more with Crown's assets. Its reputation for upholding high standards in the most demanding regulatory environments, namely Nevada and Singapore, will play well with wary local watchdogs. Crucially, its business model does not depend on high rollers and the shady junkets that finance their visits - a relationship that landed Crown in hot water. Thanks to Mr Adelson's emphasis on non-gaming operations such as events and conferences, Sands is positioned to cater to a less risky demographic.

Buying Crown would mean sacrificing other options, however.

Asides from reinvesting in its existing operations in Macau and Singapore, Sands says it is scrutinising online opportunities.

It lags peers including MGM Resorts International and Wynn Resorts on this front, and the industry is poised for a boom as the USrelaxes rules. However, margins are uncertain and valuations are high. Digital sports gaming group DraftKings, which reported a widening net loss of US$844 million for 2020, has nevertheless seen shares soar over 40 per cent year to date.

An acquisition would mark a behavioural change for US$50 billion Sands, which has historically preferred building to buying. On the other hand, the company is embarking on a new era after its founder's passing earlier this year. A trip to the Lucky Country might be in order.

Las Vegas Sands will sell its Vegas properties for US$6.25 billion, the company said on March 3. Apollo Global Management will acquire the operating assets, while Vici Properties will buy the real estate.

Sands chief executive Robert Goldstein said the company will now focus on Asia, particularly its existing operations in Macau and Singapore.

REUTERS