We’ve been a proponent of being long Las Vegas Sands (LVS) for several weeks now as part of our RIA Daily Playbook and Alpha Sheets. The main catalyst behind the bullish stance is that the company has reached and maintained 20% gaming share in Macau, due in large part to the new Sands Cotai Central (SCC). With the SCC remaining the talk of the town, we see that level of gaming share holding steady if not improving a little.
Keith bought LVS for the Virtual Portfolio at $42.05 yesterday. The stock is well off its $60+ high that occurred back in April due to a halt in VIP growth in Macau and a rough start at the SCC. With the stock down 30%, we believe concerns have been adequately discounted in the stock. Now that VIP growth is picking back up significantly (see this post: Rebound: The Macau Trade), we believe there’s buying opportunity here. Take a look at the chart below: the stock is currently above TREND support of $39.69 and has room to go to $44.47 at the upper echelon of the TRADE range.
There’s also some positive catalysts in the mix for LVS. Sheraton is opening 2500 rooms at SCC, which should be a big boost and is considered the de facto top hotel brand in China. This is big considering that the Ministry of Public Security of Macau has eased travel restrictions on Macau that now allows people living in six mainland cities – Beijing, Chongqing, Guangzhou, Shanghai, Shenzhen or Tianjin– to get visas enabling them to visit and gamble in Macau.
The company also has significant free cash flow which could be used for a stock buyback or to fund another Cotai project. Simply put, our bullish case for LVS speaks for itself.