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Bernstein raises target price for LVS, Sands China

Macau casino operator Sands China will remain as the mass market and non-gaming leader in Macau for at least the next five years, according to a note from Bernstein on Monday.

The company upscaling and expansion of Sands’ Macau properties provide a near-term catalyst for growth, profitability and cash flows.

For some time now, analysts have been observing a shift away from VIP business to that of the mass market. Bernstein views Sands as the dominant leader in this space in Macau.

“Sands China is the clear market share leader in Macau. Coupled with its hotel room capacity, Sands China is well-positioned to continue to capitalize on Macau's continued paradigm shift from VIP to Mass,” it wrote.

The company currently has 12,000 hotel rooms and suites, making up for 48 percent of hotel rooms run by casino operators in Macau.

“Furthermore, other than having the largest hotel room inventory, Sands is in the process of revamping its existing Macau properties, which is targeting to be completed in phases over the next two years,” it added.

The company is also positive for the future of its parent company, Las Vegas Sands - due to the Japan IR opportunity which provides attractive long-term optionality for LVS shareholders.

“The Japan market will likely surpass the size of Singapore and LVS is well positioned as a front-runner in the race for integrated resort development.”

Marina Bay Sands, located in Singapore, is the single most profitable casino asset globally, said Bernstein.

“MBS generated the highest EBITDA both in dollar and margin in 2018. With the long-term expansion plan, MBS is likely to remain a top shelf position over the long run.”

Bernstein said it maintains Outperform ratings for both Sands China and Las Vegas Sands, raising target price on both stocks.

“Between Sands China and LVS, depending on investment appetite, Sands China benefits from higher projected growth trajectory and greater exposure to macro China economy. On the other hand, if more weight is given to stability, diversification and long-term optionality from further developments (Singapore, Japan) and greater return of capital potential, we would look to LVS,” said the analysts.

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