What's in a company name? Sometimes, not much. For example, Apple doesn't sell apples, or any fruit for that matter. Likewise, Las Vegas Sands (LVS 1.66%) doesn't run any casinos in the city for which it's named.
It did so until February 2022, when it closed the sale of the Venetian Resort on the Strip, but in its current form, the largest U.S.-listed casino operator by market capitalization runs six gaming venues -- five in Macao, and Marina Bay Sands (MBS) in Singapore. Obviously, that's a big difference, and given Macao's status as the casino mecca of the world, many investors view Sands through a Macao lens.
They shouldn't sleep on Singapore. In fact, Marina Bay Sands is a big reason why Sands stock rocketed higher Thursday, but the venue's positive effects will be felt over the long term, not single trading sessions.
In Sands' investment thesis, Singapore deserves more love
It's already well known that Marina Bay Sands is one of the most profitable casinos in the world. But things just keep getting better for Sands in Singapore. Based on third-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $743 million, the property is positioned for annual EBITDA of $2.7 billion, according to Jefferies.
What's interesting about Marina Bay Sands is that company management acknowledged being wrong, in a good way, about the property's success. CEO Robert Goldstein said as much on a Wednesday conference call, telling an analyst that the company thought it was "ambitious" in forecasting $2.5 billion in annual Singapore EBITDA while noting that with a "big quarter," $2.8 billion or $2.9 billion is not only possible, but "very sustainable."
All right, so Marina Bay Sands is one of the most profitable casinos in the world and accounts for roughly half the owner's EBITDA. How is it overlooked in the share price? Stifel analyst Steven Wieczynski says Sands' stock is largely moved by Macao news flow, but that shouldn't be the case. Not when, by the analyst's estimate, the Singapore casino is worth $42 a share on a stand-alone basis.
NYSE: LVS
Key Data Points
For those keeping score at home, that's $42 out of a price at this writing just under $60. That says one of two things. Either the stock doesn't adequately reflect the value of the Singapore casino, or investors are getting Sands' Macao assets for an absurdly low price.
Something else to note about Singapore
It's understandable that most investors in the U.S. aren't aware of Singapore's gaming policy, but a quick lesson underscores the potency of Marina Bay Sands. The city-state is home to just one other integrated resort, operated by Genting Singapore (GIGNF 0.76%).
So, Sands and that company have a duopoly, and that's by design because Singaporean lawmakers don't want the country turning into another Las Vegas or Macao. By the way, MBS is wresting market share from its rival, and that may not be fully reflected in shares of Sands, either.