Morgan Stanley: Downgrade Sands China (01928) rating to "neutral" and lower target price to HK$16.7

Morgan Stanley released a research report stating that it downgraded its investment rating on Sands China (01928) from "outperform" to "neutral", and lowered its valuation basis from the original 12 times forecasted enterprise value to 10 times, with the corresponding target price being reduced by 21% to 16.7 Hong Kong dollars. The bank explained that after removing the valuation premium, the valuation will be in line with its peers (WYNN MACAU and MGM CHINA), reflecting a slowdown in growth to low single digits. The report noted that the group's dividends last year were equivalent to 67% of net profit, resulting in a dividend yield of 4.5%. The report pointed out that management stated in the recent earnings conference that they plan to seek approval to increase dividends, believing that raising dividends could be a potential catalyst for stock price increases. Sands China's adjusted property EBITDA for the first quarter of the 2026 fiscal year was 633 million US dollars, up 18.3% year-on-year and 4% quarterly, beating the bank's expectations. The market share during the period reached 25.7%, the highest since the first quarter of 2024. Analysts attribute this mainly to the group's production capacity advantage, making it a major beneficiary during the Chinese New Year period. Morgan Stanley slightly reduced its EBITDA forecasts for the group for the years 2026 to 2028 by less than 1%, reflecting a more cautious assumption about profit margins in 2026. This downward revision was offset by the better-than-expected performance in the first quarter of 2026.