Deutsche Bank Downgraded Las Vegas Sands (LVS) to Hold, Citing Valuation

January 7, 2009 7:36 AM EST

Deutsche Bank downgraded Las Vegas Sands (NYSE: LVS) today, from Buy to Hold, citing valuation and a shift in risk/reward.

The firm said, after the recent run-up, the stock is now fairly valued at 9x 2010 EBITDA estimates and after reaching their $9 price target. Analysts said, " At current levels we believe the shares are discounting an end to negative revisions in Vegas and Macau in addition to longer-term risk mitigation from a leverage covenant breach. We believe there is both revision and covenant risk in most quarters over the next year therefore in concert with valuation the risk/reward has now tilted less favorably."

Deutsche Bank notes that comps in Las Vegas are modest and get easier throughout this year, yet could be offset by incremental supply in '09 and '10. The firm is encouraged by the company’s focus on cost reductions, but this could be overshadowed by a combination of factors. In Macau, visa restrictions are widely known to have impeded upward momentum.

Deutsche Bank also said liquidity is improved but the company is not out of the woods on US leverage covenants.

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• Deutsche Bank
• Citi

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