[ET Net News Agency, 23 July 2020] J.P. Morgan lowered its target price for Sands China
(01928) to HK$39 from HK$41.5 and maintained its "overweight" rating.
With the Guangdong-Macau travel bubble in place, the research house now modeled industry
GGR (gross gaming revenue) to return to normal levels by 3Q of 2021 on its assumption that
major travel curbs would be gradually eased by the end of 2020.
Despite a dividend cut (JPM views it as a temporary), Sands still offers a defensive
investment opportunity, JPM said. It looks at Sands as the best way to play the structural
mass story given its outsized exposure, as well as unparalleled dominance in mass with
ample room (it controls the majority of casino hotel rooms in Macau) and powerful
clustering.
Moreover, JPM thinks the market underappreciates the potential from its growth projects,
which are scheduled to open this year (Four Seasons Grand Suites in 3Q and the Londoner
suites & hotels in 2H). JPM thinks they can generate some of the highest ROIC (return on
invested capital) in Macau and work as a "growth optionality" for the stock, given
seemingly low investor expectations. The stock trades at 11.6x trailing EBITDA (2019) that
is attractive for the quality of its assets. (KL)