Key Takeaways:
Morgan Stanley downgraded Sands China Ltd. (01928.HK) to ‘Neutral’ from ‘Outperform,’ cutting its price target by 21% to HKD 16.7 amid expectations of slowing growth.
"After removing the valuation premium, the company’s valuation will be in line with peers (WYNN MACAU and MGM CHINA), reflecting an expected slowdown in growth to mid-single digits," the broker explained in a research report.
The downgrade comes despite a strong first-quarter performance. Sands China recorded adjusted property EBITDA of $633 million, up 18.3% year-over-year and 4% quarter-over-quarter, beating the bank's expectations. The company's mass-market share also reached 25.7%, its highest since the first quarter of 2024.
Morgan Stanley trimmed its adjusted EBITDA forecasts for 2026 to 2028 by less than 1% annually, citing more cautious margin assumptions which were partially offset by the better-than-expected first quarter.
The downgrade introduces a cautious note into the Macau gaming sector, even as visitation and revenue figures recover. While Sands China's first-quarter results benefited from its capacity during the Chinese New Year, the focus now shifts to the sustainability of that growth.
A potential dividend increase, which management plans to seek approval for, could serve as a key catalyst to support the share price against the more conservative growth outlook. Investors will be watching for any announcements regarding the dividend policy following the board's review.
This article is for informational purposes only and does not constitute investment advice.
