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Morningstar | Sands’ Macau and Singapore Investments Support Its Brand Intangible Asset Advantage

We view Las Vegas Sands as well positioned for long-term growth in the gaming industry because of the attractive long-term growth opportunity of Macau (58% of 2018 EBITDA) and Sands' dominant mass and nongaming position on the attractive Cotai Strip. Sands' position in the profitable Singapore gaming market (32% of EBITDA), where a duopoly remains in place through 2030, solidifies our view of the firm's long-term growth, as does our expectation of the company being awarded a gaming license in a Japanese urban market around the end of 2020.We see solid Macau visitation and gaming growth over the next 10 years, aided over the next several years as key infrastructure projects that alleviate Macau's congested traffic (Pac On Terminal expansion and Hong Kong Bridge in 2018, the light-rail transit in 2019, and reclaimed land in 2020-25) come on line, which will expand the region's constrained carrying capacity, thereby driving higher visitation and spending levels. Our forecast for annual mid-single-digit visitation growth over the next decade is supported by China outbound travel that we expect will average high-single-digit annual growth over the next 10 years. Additionally, we expect upcoming developments that add attractions and improve Macau's accessibility will improve the destination's brand, supporting our constructive long-term view on Macau. With Sands holding one of only six gaming licenses, it stands to benefit from this growth. That said, the Macau market is highly regulated, and as a result, the pace and timing of growth are at the discretion of the government.Sands founder and CEO Sheldon Adelson was the pioneer in developing the Cotai Strip in Macau in the 2000s and did so with a higher focus on the mass (56% of profit) and nongaming segments (nearly 36% of profit). We think the government will value this investment and mix by renewing Sands' Macau gaming license, set to expire in 2022.Sands' position in Singapore is also attractive. Its Marina Bay Sands boasts extraordinary EBITDA margins (above 50%), aided by limited competition. Also, Sands is expanding its presence with development of a fourth tower, which we see opening in mid-2023.