Ratings agency Fitch has upgraded the Long-Term Issuer Default Ratings for Las Vegas Sands Corp and its subsidiaries Sands China Ltd and Marina Bay Sands Pte Ltd (MBS) from “BB+” to “BBB-” in the wake of the company’s strong 4Q23 financials, citing the “strong rebound in the Macau market and outperformance in Singapore.”
This, Fitch added, has driven leverage metrics through Fitch’s upgrade sensitivities with the pace of recent growth in Macau expected to allow LVS to remain at investment grade metrics given its strong position in the premium mass market, positive FCF (free cash flow) generation and strong liquidity.
Under the agency’s ratings system, “BBB-” ratings indicate that expectations of default risk are currently low and the capacity for payment of financial commitments considered adequate, although adverse business or economic conditions are more likely to impair such capacity.
In a Friday note, Fitch said it calculates the LVS 2023 EBITDA leverage at 3.7x and net EBITDA leverage at 2.3x, both inside the upgrade sensitivities. Further market improvement in Macau and continued strong performance in Singapore should ensure credit metrics remain at these levels or even further improvement, it added.
In Macau, Fitch said it estimates mass market baccarat has almost fully recovered to 2019 levels, particularly in premium mass, which is the target market for LVS. Notably, the fact that visitation and airline capacity remain below 2019 levels suggests that further rebound in 2024 “should provide another source of further revenue growth over the near term. In addition, capital improvements, particularly at The Londoner, should further drive long-term growth for LVS.”
In Singapore, where MBS reported 4Q23 EBITDA of US$544 million, Fitch observed that LVS is realizing “mass gaming revenue at record levels.
“Overall airport monthly passenger volume and aircraft seat capacity from China is still below pre-pandemic levels but has recovered to 87% to 2019 capacity in December 2023. Overall performance at MBS increased despite a major room renovation at the complex that left a significant number of rooms out of inventory.
“Phase I of the room refurbishment is mostly done, and Phase II is expected to be completed through 2024 and 2025. Completion of both phases will result in fewer rooms but a higher quality product to attract more affluent customers.”
The agency added, “LVS historically maintained an investment-grade credit profile due to high-quality assets in attractive regulatory regimes, a strong financial profile and a commitment to a conservative financial policy. In the long term, we expect LVS to manage its credit profile in a consistent manner, as the rapidly improving operating environment in Macau leads to stronger consolidated financial metrics.”
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