Category: Property

Investment Thesis

• Improving underlying conditions, although some uncertainty remains. 
• Solid portfolio across Retail, Office and Logistics but short-term risk around valuations and property fundamentals due to Covid-19.
• Diversified with Funds Management business generating income.
• Balance sheet strength with gearing ratio at 28.2%, well within target range of 25-35%.
• Strong tenant demand for the GPT east coast assets. 

Key Risks

• Breach of debt covenants.
• Inability to repay debt maturities as they fall due.
• Deterioration in property fundamentals, especially delays with developments.
• Environment of expected interest rate hikes. 
• Downward asset revaluations.
• Retailer bankruptcies and rising vacancies.
• Outflow of funds in the Funds Management business reducing GPT’s income.
• Tenant defaults as the economic landscape changes.

1H22 results summary. Relative to the pcp: 

• Funds from Operations (FFO) of $554.5m was flat over pcp, despite the Company continuing to provide Covid-19 rent relief to tenants, with a +3.6% YoY increase in Retail, +11% increase in Logistics and +2.3% increase in Funds Management combined with -17% YoY decline in finance costs were offset by -4.5% YoY decline in Office and +80.4% YoY increase in corporate overheads due to not having the benefit of pcp savings from the withdrawal of bonus schemes and the support of JobKeeper. FFO per security increased +1.2% to 28.82 cents, driven by on-market security buy-back. 
•  NPAT improved to $1,422.8m (vs loss of $213.2m in pcp), driven by investment property valuation increases of $924.3m (vs valuation declines of $712.5m in pcp), with 60% of coming from the Logistics portfolio and the balance from Office portfolio. 
• Total 12-month return was 14.1% vs -2.4% in pcp, amid investment property revaluation gains, driving an increase in NTA per stapled security of +9.3% YoY to $6.09. 
• Operating cashflow increased +7.2% YoY to $520.4m and FCF grew +6.7% to $467.5m, resulting from higher cash collections and no payment for variable remuneration schemes, partially offset by higher transaction costs and taxation payments. 

Capital management: 

• Strong shareholder returns with the Board buying back ~32.3 million securities (1.7% of securities on issue) at an average price of $4.54 per security for a total consideration of $146.8m (on-market security buy-back program formally concluded). 
• The Company declared a final distribution of 9.9cps, taking FY21 distribution to 23.2cps, up +3.1% over pcp and representing a distribution payout of 95.1% of FCF. 
• Ample liquidity with $934.7m held in cash and undrawn bank facilities. 
• Well managed debt profile with weighted average cost of debt down -70bps over pcp to 2.4%, with modest increase expected in FY22 because of potential interest rate increases. 
• Gearing increased by +500bps to 28.2% YoY (well within gearing range of 25-35%) primarily driven by debt funded acquisition of the Ascot Capital portfolio, resulting in S&P/Moody’s rating of A (negative)/A2 (stable) vs A (stable)/A2 (stable) in pcp, within GPT’s target A-rating band.

Company Profile

GPT Group (GPT) owns and manages a portfolio of high-quality Australian property assets, these include Office, Business Parks and Prime Shopping Centres. Whilst the core business is focused around the Retail, Office and Logistics, it also has a Funds Management (FM) business that generates income for the company through funds management, property management and development management fees. GPT’s FM business has the following funds, GPT Wholesale Office Fund (GWOF – A$6.1b) launched in July 2006, GPT Wholesale Shopping Centre Fund (GWSCF – A$3.9b) launched in March 2007 and GPT Metro Office fund (GMF – A$400m) launched in 2014.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Investment Thesis 

• Management’s upgraded FY22 EPS guidance provides us with certainty in near-term earnings outlook. 
• GMG’s high-quality investment portfolio which is globally diversified and gives exposure to developed and emerging markets.
• Strong property fundamentals which should see valuation uplifts. 
• With more than 50% of earnings derived offshore it is expected that GMG will benefit from FX translation and a prolonged period of lower rates.
• Transitioning to longer and larger projects in development
• Strong performances in Partnerships such as Cornerstone.
• GMG’s solid balance sheet providing firepower and access to expertise to move on opportunities in key gateway cities with demand for logistics space (and supply constraints) and diversify risk by partnering (i.e. growth in funding its development pipeline) or co-investment in its funds and or make accretive acquisition opportunities. 
• Expectations of continual and prolonged lower interest rate environment globally (albeit potential rate hikes in the US) should benefit GMG’s three key segments in Investments, Development and Management.

Key Risks

• Any negative changes to cap rates, net property income.
• Any changes to interest rates/credit markets.
• Any development issues such as delays.
• Adverse movements in multiple currencies for GMG such as BRL, USD, EUR, JPY, NZD, HKD and GBP.
• Any downward revaluations.
• Poor execution of M&A or development pipeline.
• Key man risk in CEO Greg Goodman.

1H22 Results Highlights

• Operating profit of $786.2m was up +27.9% on pcp and Statutory NPAT of $2.0bn was up +92.3% primarily due to significant gains in fair value on investment properties in partnerships. 
•  Group NITA was up +15% to $7.69 and operating EPS of 41.9cps was up +27% on pcp. 
•  Group operating profit performance was driven by all three segments – Property investment earnings $234m up +19.3%, Management earnings $258.2m up +17.8% and Development earnings $562.8m up +41.7%. 
•  Balance sheet retained a strong position at the end of the period, with gearing of 7.3% and 18.7% on a look-through basis. The Company has $2.0bn in liquidity available. 
• Development work in progress (WIP) increased +19.8% to $12.7bn from 30 Jun-21, with the number of developments up to 81 (from 56 in pcp) and average development period for projects in WIP up to 22 months (from 18 months in pcp). Supply chain issues have not significantly impacted GMG, with management noting – “Goodman has managed COVID-related disruptions to minimize impact. Despite increases in construction costs, driven by supply, chain, labor and material shortages, Goodman has maintained strong margins and has a yield on cost of 6.7%.” Good momentum in the segment with management expecting “more than 30%” earnings growth for FY22. 
• Management earnings were up +17.8% on pcp driven by revaluations gains, development completions and acquisitions. External AUM up +32% to $64.1bn. Performance fees for the period of $73.6m was up +9.9% on pcp, with management noting – “…the performance and activity levels of the partnerships continues to be strong, so the full year transactional and performance fee revenue is now expected to be over $170m. Overall, the full-year management revenue is expected to be up by nearly 20% over FY21. Fee revenue as a percentage of average stabilized assets under management will be around 1% this year, which is within the range of what we expect over time. So, we believe the scope exists for the continuation of growth in management income over the long term.” 

Company Profile

Goodman Group Ltd (GMG) own, manage, develop industrial, warehouse and business park property in Australia, Europe, Asia and Americas. GMG actively seeks to recycle capital with development properties providing stock for ownership by either the trust or third party managed funds, with fees generated at each stage of the process.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Investment Thesis

• WPR currently trades at a discount to its NTA and our valuations 
• Solid distribution yield.
• Quality $3.09bn asset portfolio (433 properties) with Weighted Average Lease Expiry (WALE) of 10.0 years.
• Majority of assets on triple net leases, where the tenant is responsible for all property outgoings. 
• Waypoint REIT leases to Viva Energy who has an Alliance Agreement/Site Agreements with Coles Express and a brand License Agreement with Shell. 
• Potential expansion of property network by way of earnings accretive acquisitions.
• Solid capital management with gearing with flexibility to make further acquisitions.
• High barrier to entry; difficult to replicate asset portfolio. 

Key Risks

• Tenant concentration risk.
• Termination of the alliance agreement with Coles Express.
• Competition by other branded service stations.
• Increased cost of fuel supply putting pressure on tenants.
• The sale of properties in the portfolio resulting in lower rental income.
• Potential for excess supply of service stations thus affecting valuations and other property metrics of the portfolio. 

FY21 Results Highlight

• Statutory net profit of $443.6m, up +58.5%, driven by 40bp of cap rate compression across the portfolio.
• Distributable Earnings of $122.6m, up +3.5%. Distributable Earnings per security of 15.80 cents, up +4.25% (versus 15.15 cents in FY20).
• Net tangible assets per security at FY21-end of $2.95, up +18.5% versus $2.49 in the pcp.
• 159 properties (or over one-third of the portfolio) were independently valued with directors’ valuations for the remaining assets, resulting in a gross valuation uplift of $320.1m and portfolio weighted average capitalisation rate (WACR) tightening from 5.56% at FY20-end to 5.16% at FY21-end.
• 40 non-core assets were divested for $137.1m, or a +10.5% premium to prevailing book value.
• Weighted average lease expiry of 10.0 years, with five leases renewed during the year for an overall +3.5% increase in rent.
• WPR’s balance sheet remains strong with gearing of 30.1% is within the 30-40% target gearing range, with $59.6m of liquidity currently available and no debt expiring until 2024. WPR’s $200.0m Australian medium term note issuance and $285.0m of bank debt refinanced, extending weighted average debt maturity from 4.3 years to 5.0 years at FY21-end. 73% of debt hedged at FY21-end with a weighted average hedge maturity of 3.6 years.
• WPR completed $173.3m of capital management initiatives including buy-back of 15.3m stapled securities for $41.1m (average price of $2.68 per security), a $132.2m return of capital (17cps) and a security consolidation approved by securityholders.

Company Profile 

Waypoint REIT Ltd (WPR) is an Australian listed REIT that owns a portfolio of service stations across all of Australia’s states and territories. It currently owns 469 service stations in its portfolio. Its service stations are leased on a long-term basis to Viva Energy Australia who has licence and brand agreements with Shell and Coles Express. 

(Source: BanyanTree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Investment Thesis

• Trades below our valuation, with an attractive (and growing) distribution of ~5%.
• Strong and experienced management team.
• Highest quality property portfolio of any Australian listed retail REIT with SCG’s portfolio heavily weighted to the growth economies of Sydney, Brisbane, and Melbourne. Approx. 20 million people live within close proximity to SCG’s 42 Westfield Living Centres. 
• Expectations of a prolonged low interest rate environment and ongoing fiscal measures should be supportive of consumer spending.
• Potential recovery in retail sales.
• Balance sheet is in a strong position. 
• Potential upside from its >$3bn redevelopment pipeline – if SCG undertakes ~$700m of developments p.a., we expect c$80m of value created per annum. SCG expects in excess of 15% returns (development yields >7.0% and cap rates of ~5.5%; NOI growth with rent escalations of CPI +2% and development yield targets of >7%).

Key Risk

• Covid-19 is prolonged with significant lockdowns re-introduced.
• Significant re-basing of rents.
• Structural shift continues to remove consumers/foot traffic from SCG’s centres. 
• Unexpected and aggressive increases in interest rates or deterioration in credit/capital markets.
• Any slowdown in demand and net absorption for retail space;
• Any deterioration in property fundamentals especially delays with developments, declining asset values, retailer bankruptcies and rising vacancies.  
• Any delays in developments.
• Lower inflation (and deflation) affecting retailers

1H22 Results Key Highlights:  Relative to the the pcp:

• Operating Profit of $845.8m, or 16.32cps, up +10.9%. 
• Funds From Operations (FFO) of $862.5m, or 16.64cps, up +12.7%. 
• Statutory result inclusive of unrealised non-cash items was $887.9m, up from ($3,731.8)m and includes property revaluation gains of $81.2m. 
•  Operating Profit, FFO and the Statutory result each include a non-cash Expected Credit Charge (ECC) of $168.8m relating to the financial impact of the Covid-19 pandemic versus $304m in FY20. 
•  Net Operating Cash Flows (after interest, overheads and tax) of $913.6m, was up +24.8%, driven by SCG collecting $2,258m in gross rent in FY21, ~$200m more than FY20. 
• Distribution of $738.7m equates to 14.25cps, up +103.6% and exceeds guidance. 
•  SCG maintained a strong balance sheet with available liquidity of $5.6bn, which is sufficient to cover all debt maturities to early 2024; Interest cover of 4.0x; balance sheet gearing at 31 December 2021 of 27.5%; 12.8% FFO to debt; and 5.6x debt to EBITDA. S&P, Fitch and Moody’s upgraded SCG’s outlook to Stable. 

Company Profile

Scentre Group (SCG) is an Australia Retail A-REIT. The company derives earnings from operating, managing and developing retail assets. SCG has interests in 42 high-quality Westfield malls across Australia and New Zealand, worth ~$38.2bn. SCG owns 7 of the top 10 centres in Australia, and 4 of the top 5 centres in New Zealand. SCG earmarked ~$3bn in potential development.

 (Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Investment Thesis 

• Trading at a slight premium to NTA which does not capture the full value of CQE, in our view.
• Solid dividend yield.
• Quality assets with strong property fundamentals such as 100% occupancy and WALE of 14.6 years.
• Majority of leases are triple-net leases.
• CQE is a play on (1) population growth; (2) increasing awareness of early childhood education; (3) increasing the number of families with both parents working and hence demand for childcare services. CQE has increased its portfolio weighting towards social infrastructure assets.
• CQE’s tenants possess strong financials 
• Strong history of delivering continuing shareholder return and dividends.
• Solid balance sheet position.
• Strong tailwinds for childcare assets and social infrastructure assets.

Key Risks

• Regulatory risks.
• Deteriorating property fundamentals.
• Concentrated tenancy risk, especially around Goodstart Early Learning.
• Sentiment towards REITs as bond proxy stocks impacted by expected cash rate hikes.
• Broader reintroduction of stringent lockdowns across Australia due to Covid-19. 

Performance of Property portfolio

• Statutory profit of $207.7m, up $150.4m relative to the PCP. Operating earnings of $30.8m, was up +5.8% and equates to 8.5cpu, up +6.3%. 
• Distribution of 8.4cpu, was up +12.0% on PCP.
• CQE’s gross assets of $1.9bn, is up +28.2% since Jun-21. NTA of $3.78 per unit is up +16.3% since June 2021.
• CQE retained a strong balance sheet with gearing of 30.0% (and look-through gearing of 30.8%), investment capacity of $200m, and no debt maturity until January 2025.
• CQE retained a long WALE of 14.6 years, 100% occupancy with lease expiries within the next five years equating to a minimal 3.9% of portfolio income. 75% of CQE’s leases are now on fixed rent reviews resulting in a forecast WARR of 3.0%.
• CQE acquired 24 assets for $192.7m with an average yield of 4.5% and average WALE of 13.4 years.

Company Profile 

Charter Hall Social Infrastructure REIT (formerly Charterhall Education Trust) (ASX: CQE) is an ASX listed Real Estate Investment Trust (REIT). It is the largest Australian property trust investing in early learning properties within Australia and New Zealand but recently widen its mandate to also invest in social infrastructure properties.

(Source: BanyanTree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Investment Thesis 

• Strong FY22 distribution guidance.
• SCP is trading at a slight premium to its NTA.
• Sustainable distribution yield.
• Strong and experienced management team.
• Retail properties continue to be a softening broader market in Australia.
• Current low interest rate environment fosters growth and demand in the retail industry.
• Improving trends in supermarket sales growth, with strong performance from Woolworths.
• Robust development outlook and potential upside from development pipeline and new acquisitions. 
• Increasing exposure to anchor and non-discretionary customers, providing sustainable and longer-term cash flows and rental income.
• SCP’s portfolio occupancy rate is 98.3%; it has in excess of 1,300 tenants. The bulk of gross rent comes from Woolworths and Wesfarmers, and of the remaining portion, there is a heavy weighting towards non-discretionary categories

Key Risks

• Potential further Covid-19 impacts may result in rental earnings and valuation declines.
• Likely increases in interest rates or deterioration in credit/capital markets in coming years. This narrows the interest rate-dividend yield differential.
• Digital trend of online shopping reduces demand for retail spaces especially with the entrance of Amazon in the Australian market. Hence, this may also affect valuations of assets.
• Any deterioration in property fundamentals especially delays with developments, declining asset values, retailer bankruptcies and rising vacancies.  
• Lower sales growth for WES/Coles and WOW because of Costco and Aldi taking market share

FY21 Results Highlights

Relative to the pcp: 

• NPAT of $432.4m was up 320.2% due to an increase in the fair value of investment properties. Funds From Operations (FFO) of $94.3m, up +30.4% (or on FFO per unit basis, 8.57 cents per unit was up +27.5%). Adjusted Funds From Operations (AFFO) of $80.9m, was up +29.6% (AFFO per unit of 7.35 cpu, was up +26.7%). 
• Distributions of 7.20 cpu, was up by 26.3% and equates to a payout ratio of 99% of AFFO. 
• Gearing of 32.5% was up from 31.3% at 30 June 2021 due to acquisitions completed during the period. Management highlighted this is toward the lower end of SCP’s target range of 30-40% (with a preference to remain below 35% at this point in the cycle). 
• SCP’s investment property portfolio value of $4,426.4m, is up by $426.4m since 30 June 2021, on valuation increase of $386.5m and acquisitions of $347.5m, offset by transfer of properties to “held for sale” of $307.6m. SCP’s net tangible assets of $2.84 per unit is up +12.7% from $2.52 at 30 June 2021 primarily due to the valuation increase.  

Company Profile

SCA Property Group (SCP) owns a diversified shopping centres portfolio located throughout Australia. The portfolio is currently valued at $4,426.4 million. SCA Property Group predominantly focuses on convenience retailing through its ownership and management of a quality portfolio of neighborhood and sub-regional shopping centres and freestanding retail assets.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Investment Thesis

• Stable and sustainable distribution yield.
• Trades on a ~6.4% premium to NTA.
• Strong and experienced management team.
• WES stake in BWP (24.75%) provides security against risk of non-renewal of leases by Bunnings. 
• High quality property portfolio with long weighted average lease expiry, strong lease covenants, and high occupancy.
• Low interest rate environment is encouraging for the housing industry and hardware sales however any sudden increase in interest rates provides risk to both revenue and debt financing costs. 
• Solid balance sheet with low gearing levels. 
• Risk of poor execution in redevelopment of assets vacated by Bunnings to other uses.

Key Risks 

• Any slowdown in demand and net absorption for hardware space.
• Persistent lower inflation (and deflation) affecting retailers.
• Economic conditions affect property fundamentals such as values (cap rates and rental growth), vacancies, retail activity (and hence demand for space at big-box retail sites). 
• Risk of non-renewal of leases by Bunnings Group. 

Property Portfolio Update

• During 1H22, BWP’s entire investment property portfolio was revalued (10 by independent valuers and remaining 63 properties subject to directors’ valuations). BWP’s weighted average capitalisation rate was 5.11% (versus 30 June 2021: 5.65%; 31 December 2020: 5.84%).
• BWP’s portfolio value increased by $280.6m to $2,916.7m (which captures capital expenditure of $2.3m and revaluation gains of $291.8m, after adjusting for the straight-lining of rent of $1.0m and less net proceeds from divestments of $14.5m (In July 2021, BWP finalised its sale for its Mindarie, Western Australia property for $14.5m and did not acquire any assets during 1H22).
• Occupancy and average lease expiry of 97.6% and 4.3 years (flat versus December 2021) respectively.
• 47 leases were subject to annual fixed or CPI reviews during 1H22 with a weighted average increase in annual rent for 23 CPI reviews of 3.3% and the 24 fixed reviews was 3.4%.
• Excluding rental income form properties acquired, upgraded or vacated and re-based since the pcp, rental income increased by 2.2% over the pcp, which betters 1.8% for the 12 months to 31 December 2021.

Company Profile 

BWP Trust (BWP) is a real estate investment trust focused on operating, owning, and divestments and acquisitions of large format retailing properties, in particular, Bunnings Warehouses, leased to Bunnings Group Ltd (‘Bunnings’). Bunnings is the leading retailer of home improvement products in Australia and New Zealand and is a major supplier to builders and trades people in the housing industry. BWP is managed by an external responsible entity, BWP Management Ltd who is paid an annual fee based on the gross assets of BWP. Both Bunnings and BWP Management Ltd are wholly-owned subsidiaries of Wesfarmers (WES), one of Australia’s largest listed companies. WES owns ~24.75% of BWP. Currently, BWP is the largest owner of Bunnings Warehouse sites, with a portfolio of ~80 stores. Eight properties have adjacent retail showrooms leases to other retailers.  BWP also owns one stand-alone showroom property. The assets have a current value of ~$2.9bn, WALE of ~4 to 5 years, 97.5% occupancy rate.

(Source: BanyanTree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Investment Thesis:

• Trading at a discount to NTA and our blended valuation. 
• Economic conditions appear to be improving ahead of expectations post the Covid-19 related impact – this should be positive for asset revaluations and rents. 
• Strong history of delivering continuing shareholder return and dividends.
• Solid balance sheet position.
• Strong property portfolio metrics.
• Selective asset acquisitions.
• Expiry risk is relatively low in the near-term. 
• Attractive yield in the current low interest rate environment. 

Key Risks:

• Regulatory risks. 
• Deteriorating property fundamentals, including negative rent revisions. 
• Deterioration in economic fundamentals leading rent deferrals etc. 
• Sentiment towards REITs as bond proxy stocks impacted by expected cash rate hikes.
• Deterioration in funding costs.

Key highlights:

• Charter Hall Long WALE REIT (CLW) reported a solid set of 1H22 results reflecting operating earnings of $97.8m, or 15.31cps, up +5.6%, and distributions of 15.24cps, up 5.1% on pcp.
• CLW’s portfolio retained strong operating metrics – at period-end, CLW’s portfolio is 99.9% occupied and comprised 549 properties with a long WALE of 12.2 years.
• In the half, CLW also completed its acquisition for $814m for a 50% interest in the ALE Property Group, acquired in partnership with Hostplus. The ALE Property Portfolio comprises 78 high quality pub assets, of which 74 bottle stores are in 99% metropolitan locations.
• The ALE Property Portfolio comprises 78 high quality pub assets, of which 74 bottle stores are in 99% metropolitan locations.
• The stock currently trades at a discount to its net tangible assets, most likely as investors are concerned over the impact of Covid-19 and associated regulatory lockdown measures, and its impact on property valuations.
• However, over the longer term, based on the quality of CLW’s management team and property portfolio, and sustainable dividend yield.
• CLW’s total property portfolio value increased ~$1.42bn to $6.98bn, driven by $923m of acquisitions and $532m in property revaluation uplift.

Company Description: 

Charter Hall Long WALE REIT (ASX: CLW) is an Australian REIT listed on the ASX and investing in high quality Australasian real estate assets (across office, industrial, retail, agri-logistics and telco exchange) that are  redominantly leased to corporate and government tenants on long term leases. CLW is managed by Charter Hall Group (ASX: CHC). 

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Business Strategy and Outlook:

Although the pandemic and government regulation continue to materially affect near-term demand in Macao (68% of estimated 2024 EBITDA), Las Vegas Sands and the gaming enclave are still thought of as well positioned for long-term growth. Not only does Sands hold a dominant mass and nongaming position on the attractive Cotai Strip, but the company will reinvest proceeds from the planned $6.25 billion sale of its Vegas assets (scheduled to close in 2022) in its Asian assets, strengthening the brand locally. Meanwhile, Sands’ position in the profitable Singapore gaming market (32% of estimated 2024 EBITDA), where a duopoly remains in place through 2030, is buoyed by the company expanding its presence with the renovation of its existing towers in 2022-23 and development of a fourth tower scheduled to open in 2025, solidifying our view of the firm’s long-term growth.

Although the pandemic and government regulation present material potential demand headwinds, analysts continue to forecast annual mid-single-digit steady-state visitation growth in Macao during 2025-30, supported by China outbound travel that they expect average high-single-digit annual growth during that time. Also, upcoming developments are expected that add attractions and improve Macao’s accessibility, which will improve the destination’s brand, supporting our constructive long-term view on Macao.

Financial Strength:

Las Vegas Sands entered 2020 with the industry’s strongest balance sheet, as its 1.5 times net debt/adjusted EBITDA was well below the 4 times covenant level. But given the material impact from COVID-19 on 2020-22 gaming demand, the company has suspended its dividend and share repurchases. That said, Las Vegas Sands ended 2021 with $1.9 billion in cash and $4 billion available in credit. This liquidity provides the company enough liquidity to operate at near zero revenue into 2023, assuming a monthly cash burn of around $350 million. Its liquidity profile stands to be enhanced further with the planned sale of its Las Vegas assets for $6.25 billion in 2022.

The proceeds from the sale are expected to be reinvested in its existing Macao (if the government allows) and Singapore properties and used to pay down debt in the back half of our 10-year forecast. As a result, the company’s financial health remains solid.

Bulls Say:

• Sands is well positioned to exploit growth opportunities in the attractive Asia casino market with a dominant position in Singapore (around mid-60s EBITDA share) and China (around mid-30s EBITDA share). 
• The company has a narrow economic moat, thanks to its possession of one of only two licenses to operate casinos in Singapore and one of only six licenses to operate casinos in China. 
• Sands’ continued investment in Macao and Singapore support its competitive position.

Company Profile:

Las Vegas Sands is the world’s largest operator of fully integrated resorts, featuring casino, hotel, entertainment, food and beverage, retail, and convention center operations. The company owns the Venetian Macao, Sands Macao, Londoner, Four Seasons Hotel Macao, and Parisian in Macao, the Marina Bay Sands resort in Singapore, and the Venetian and Palazzo Las Vegas in the U.S. (which it plans to sell to Apollo and VICI for $6.25 billion in 2022). Sands are expected to open a fourth tower in Singapore in 2025. After the sale of its Vegas assets, the company will generate all its EBITDA from Asia, with its casino operations generating the majority of sales.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.