CICC: Maintains Outperform rating on Sands China (01928), target price of HK$23.80.

CICC released a research report stating that it would maintain its EBITDA forecast for Sands China (01928) for 2026 and 2027. The current stock price corresponds to 9 times the 2026 EV/EBITDA. The bank maintains an outperform rating and a target price of HK$23.80, which corresponds to 11 times the 2026 EV/EBITDA, representing a 26% upside potential from the current stock price. Key points from CICC are as follows: - EBITDA for 4Q25 was lower than market expectations Sands China reported its 4Q25 performance: net revenue was USD 2.058 billion, up 16% year-on-year and 8% quarter-on-quarter, recovering to 92% of the level in 4Q19. Adjusted property EBITDA was USD 608 million, up 6% year-on-year and 1% quarter-on-quarter, recovering to 75% of the level in 4Q19, lower than the expected USD 632 million. - Increase in costs due to marketing rebate programs and daily operating expenses The bank found that in 4Q25, the company achieved a higher market share of gambling revenue (24.5% in 4Q25 compared to 23.7% in 3Q25), benefiting from member programs (such as cash rebates and rewards) and growth in customers from other Asian regions. Despite the higher market share of gambling revenue in 4Q25, the company believes that EBITDA is still affected by high operating costs (such as the cost of hosting events like NBA China games) and increased staff salaries (due to the increase in gambling table capacity). - High-end segment (VIP business and premium mass) expected to continue leading industry growth, with a competitive marketing rebate environment The company expects the marketing rebate environment in 2026 to stabilize, driving continuous optimization of reinvestment rates, which may have a positive impact on EBITDA profit margin (indicating that aggressive marketing competition may end); the deployment of side bet products (similar to MBS) is still ongoing, but customer participation from Chinese and Macau customers may not meet expectations, potentially limiting the expected structural growth in win rate. The company expects visitor numbers and customer plans during the Chinese New Year period to remain strong. Although property foot traffic has surpassed 2019 levels, the high-end mass segment (recovering to 117% of 4Q19, up 6% quarter-on-quarter) still outperforms the regular mass segment (recovering to 95% of 4Q19, unchanged quarter-on-quarter), indicating a decrease in average spending power of regular mass segment customers. - Risk warning: Recovery may be slower than expected; intensification of industry competition, leading to potential loss of market share.