Las Vegas Sands Corp. (NYSE: LVS) posted a first-quarter net loss of $51 million, compared to a $744 million profit in Q1 2019, and a 51% dip in revenue YoY, down from $3.65 billion to $1.78 billion as a result of the coronavirus induced slowdown across the entire travel and entertainment sectors.
Year-to-date, the stock is down 35% compared to S&P which lost 13%.
LVS was the first major U.S. gaming company to report results for the March 2020 quarter.
The company is optimistic that business in the US could return to normalcy only by late August.
LVS cancels dividend
As the gambling industry thrives on air travel and large gatherings of people, the coronavirus has resulted in an 80% loss of gaming revenue. The company accordingly canceled its dividend recently
Sheldon Adelson, CEO and Chairman, said, “I know that the dividend is important to all our shareholders, as it is to me. But the impact of the COVID-19 pandemic on our business has been unprecedented, and I have never seen anything like it in my over seventy years in business.”
LVS commenced paying a dividend in 2012.
Strong liquidity base
The company has a strong financial position, with $2.6 billion cash and $3.9 billion credit available.
Adelson claimed LVS has the liquidity to survive 18 months of zero revenues while still progressing its investments in Macau and Singapore properties.
Further, LVS’ investment-grade rating meant raising debt to meet liquidity requirements will not be an issue upon the eventual recovery of the travel and entertainment sectors.
Capex and M&A
The company said the current scenario will not affect its upcoming capital expenditure and expansion plans.
In response to a question during the company’s conference call, Adelson also confirmed LVS’s interest in M&A.
LVS certainly doesn’t lack muscle – Adelson said that pre-corona, LVS’s market value exceeded the combined value of all its US-based rivals. Therefore, options remain open to acquiring a rival or even individual properties.
Management showed confidence in a quick recovery in the Asia region citing the region’s experience of dealing with the SARS epidemic and gradual lifting of coronavirus-related bans.
The company also expects safety requirements such as masks, distancing, or temperature checks to be much better received in Asian markets than domestically.
COO, Robert Goldstein also assured investors social distancing won’t be an issue in operations due to huge square footage and ample availability of tables and slots.
Management expects the gambling and hotel business in Asia to pick up by late summer or early fall in Asia.
The management also stated it is already registering high interest from high-rollers and regular customers regarding the re-opening of its properties. It is also confident of support from city authorities because the gambling and entertainment business makes up a huge part of employment and revenue for both Macau and the state of Nevada.
Stock (and analysts) react positively
Following the earnings report, LVS’s shares shot up nearly 7% in after-hours trading and another 10% at the market open. JP Morgan responded to the numbers by upgrading the stock from neutral to overweight and giving it a $52 price target.