Las Vegas Sands Upgraded to Investment-Grade by Fitch

Las Vegas Sands (NYSE: LVS) earned another investment-grade credit rating, this time courtesy of Fitch Ratings. The research firm cited Macau’s rebound and overall strength in Singapore, Sands’ two operating markets.

Fitch observed that based on those metrics, LVS drove leverage through the ratings agency’s “upgrade sensitivities.” Sands is now rated “BBB-“ with a “stable” outlook, achieving that grade about eight months after Standard & Poor’s (S&P) became the first of the three major credit research firms to restore the gaming company’s investment-grade rating.

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.

Including Sands China, the six Macau concessionaires won $2.4 billion last month, marking a 67% year-over-year jump. Sands China is the largest operator in the Special Administrative Region (SAR), with five casino hotels.

Sands Can Fund Big Projects

LVS spent $325 million in the fourth quarter on enhancing its Macau properties, Marina Bay Sands, and on other expenses. Fitch believes the operator can handle larger-scale spending, including a possible New York integrated resort, without damaging its balance sheet.

“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.”

“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.”

Macau, Singapore Can Notch More Growth

Marina Bay Sands, which is one of the most profitable integrated resorts in the world, is already breaking records among mass market bettors while the premium mass segment is carrying the day in Singapore.

Integral to the outlook on Sands’ credit profile and shares is the point that while Macau and Singapore casinos are thriving, Chinese visitation to both regions remains below pre-coronavirus pandemic highs. That implies there’s more room for growth.

“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.”