[ET Net News Agency, 22 July 2020] HSBC Global Research lowered its target price for
Sands China (01928) to HK$38 from HK$38.5 and maintained its "buy" rating.
The research house said Mass is historically a more resilient segment. However, in the
current circumstances, bigger asset and cost bases make the operator more vulnerable to
negative operating leverage amid a sharp drop in GGR (gross gaming revenue).
A higher degree of non-gaming exposure does not help buffer earnings as the performance
of non-gaming offerings is linked to GGR growth, which is dampened by a lack of visitation
and business.
Looking past FY2020, new capacity at the Four Seasons which was scheduled to be added in
this mid-year should put Sands in a better position to capture growth as demand recovers
into FY2021. Renovation work at Sands Cotai Central/Londoner has also sped up as the
operator no longer has to space out the work in fear of disruptions. These should all help
to buffer potential social distancing impact on its grind (low end) mass business.
HSBC cut its FY2020 and FY2021 EBITDA forecasts by 90% and 10%, due to new market growth
assumptions. (KL)