It is no secret to anyone that there has been carnage in hospitality stocks, with the cruise line and hotel industry getting particularly smashed. The casino industry was no exception, and we considered Las Vegas Sands (NYSE:LVS) to be unstably priced at levels just below $70 despite the fact that it has some of the greatest properties in the industry. In our last article, to analyse Sands we employed a simple model that assessed how many days of shut-down or zero activity were implied by market prices. We employ this model again at these levels to see if now those expectations are optimistic at around $40 per share when the Marina Bay in Singapore and their Las Vegas exposures will be suffering too.
The Situation at Hand
Rather than before, where casinos in the US were still open, we are now in a situation where almost all casinos are closed or basically empty both in Macau, the US and elsewhere. Now that China has started to get a hold of its coronavirus situation, Macau has actually stopped its mandated shut-down period with half of the tables reopening. Nonetheless, Macau relies substantially on tourist activity which has all but dried up, and casino executives continue to acknowledge that activity will be low. This is evident in the fact that incentives are being extended to would-be gamblers such as cash cards and that measures are being employed to maintain appropriate distance between players even in crowded games like Baccarat.
(Source: forbes.com)
Given that Macau activity is still feeble, at this point almost all Sands' markets are operating at either minimal or zero activity. Even Singapore, where a month ago we saw resilience at the Marina Bay, is a weak market due to quarantines and social distancing. At this point Sands is losing money on a daily
