Argus Upgrades Las Vegas Sands; Macau Gaming Revenue Up For First Time In 2 Years

The Macau region has been a big headwind for most of the gaming companies over the last couple of years. This was evident when Las Vegas Sands Corp. (NYSE: LVS) struggled to meet EPS estimates in the last three quarters. However, Argus believes the conditions have changed for the better for the first time in two years.

As Macau's revenue is up for the first time in two years, the brokerage feels it's time to reassess Las Vegas Sands.

As a result, analyst John Staszak upgraded the shares to a Buy rating with a target price of $67, implying a more than 15 percent upside potential from current levels.

Justification

The brokerage pointed out two key factors for the revision:

• Gaming revenue increase in Macau in August reflects a definitive shift. This is the first time that the region witnessed an increase in 27 months.
• The company launched its $3 billion Parisian resort in the region, which included 100 gaming tables. However, the government has given permission to add 25 tables in both 2017 and 2018.

In a research note, Staszak said, "We believe that LVS is well positioned in this segment, and expect it to benefit from its Integrated Resort business model, which includes hotels, convention centers, and retail stores, as well as casinos.

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"LVS is also focused on maintaining high occupancy at its Macau hotels. In addition, we expect investors to benefit from the company's highly profitable Singapore operations, $2 billion share buyback program, and 5.1 percent dividend yield."

The brokerage lifted its EPS projections from $2.00 to $2.16 for the current year and from $2.28 to $2.40 for next year. The analyst retained the long-term EPS growth estimate of 14 percent.

Las Vegas Sands was seen trading at $58.19, up 2.92 percent on the day at time of writing.

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