Morgan Stanley Comments On Las Vegas Sands Following DOJ Investigation

Morgan Stanley believes that that the Department of Justice's investigation into Las Vegas Sands' LVS compliance with the Foreign Corrupt Practices Act (FCPA) has a wide range of outcomes but note that FCPA enforcement penalties typically involve modest fines. Given the recent 20% pullback in the shares, the market appears to be pricing in a high likelihood of a meaningfully negative outcome. While transparency is very limited, Morgan Stanley believes the worst-case scenario is unlikely. Morgan Stanley feels negative news is priced in and estimates Macau is worth $20/share in its SOTP valuation. With the stock down ~$10 since the FCPA investigation, Morgan Stanley estimates shares are pricing in a 40-50% probability of LVS losing its Macau license, which it views as highly unlikely. Looking at past FPCA cases, Morgan Stanley estimates the median fine has been ~$7mn and investigations have lasted 1-2 yrs. It notes that the highest fine would equate to ~$2 per share in LVS equity value. Morgan Stanley has a $50 PT and Overweight Rating on LVS LVS is trading higher at $39.07