Fitch Ratings recently 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 response to the company’s robust financial performance in the fourth quarter of 2023. The upgrade is attributed to the impressive recovery in the Macau market and exceptional performance in Singapore.
Financial Performance Overview:
Las Vegas Sands Corp has exhibited a strong financial performance in 4Q23, prompting Fitch Ratings to upgrade its Long-Term Issuer Default Ratings. The company’s resilience is particularly highlighted by the substantial rebound in the Macau market and its outperformance in Singapore.
Macau Market Resilience:
Fitch emphasizes the strong rebound in the Macau market, with mass market baccarat nearly fully recovering to 2019 levels, especially in the premium mass segment, which is a key target market for LVS. Despite visitation and airline capacity remaining below 2019 levels, the report suggests that further recovery in 2024 is anticipated, providing an additional source of revenue growth in the near term.
Performance in Singapore:
In Singapore, Marina Bay Sands reported an impressive 4Q23 EBITDA of US$544 million, with LVS realizing record levels of mass gaming revenue. Although overall airport monthly passenger volume and aircraft seat capacity from China are not yet back to pre-pandemic levels, a recovery to 87% of 2019 capacity in December 2023 indicates positive momentum. Fitch notes that despite a major room renovation at MBS, overall performance increased, and ongoing room refurbishments are expected to enhance the quality of the product, attracting a more affluent customer base.
Credit Metrics and Leverage:
Fitch calculates LVS’s 2023 EBITDA leverage at 3.7x and net EBITDA leverage at 2.3x, both within the upgrade sensitivities. The agency anticipates that further market improvement in Macau and sustained strong performance in Singapore will help LVS maintain or even improve its credit metrics. The “BBB-” ratings signify low expectations of default risk and adequate capacity for financial commitments, despite potential challenges from adverse business or economic conditions.
Long-Term Outlook:
Fitch projects that LVS will continue managing its credit profile consistently, benefiting from the rapidly improving operating environment in Macau, which is expected to lead to stronger consolidated financial metrics. The agency highlights LVS’s historically maintained investment-grade credit profile, driven by high-quality assets in attractive regulatory regimes, a strong financial profile, and a commitment to conservative financial policies.
Strategic Investments and Capital Improvements:
The report acknowledges that capital improvements, particularly at The Londoner in Macau, are expected to drive long-term growth for LVS. Additionally, ongoing room refurbishments at Marina Bay Sands are aimed at providing a higher quality product to attract a more affluent customer base, reinforcing the company’s commitment to enhancing customer experience and maintaining its competitive edge.
Fitch’s decision to upgrade the ratings of Las Vegas Sands Corp and its subsidiaries reflects confidence in the company’s ability to navigate the challenging economic landscape. The strong rebound in the Macau market, coupled with sustained performance in Singapore, positions LVS favorably for continued success. As the company manages its credit profile prudently and invests strategically, the long-term outlook remains positive, paving the way for sustained growth and financial stability.