Citi has issued a research report indicating that while it anticipates higher event-related expenses will recur for Sands China Ltd (01928) over the next four years (2026 to 2029), it remains confident that the company's EBITDA margin can reach the lower end of the low-30% range. The firm reiterated its "Buy" rating on Sands China but lowered the target price from HK$24.25 to HK$23, based on a sum-of-the-parts valuation method. Sands China's fourth-quarter results were largely in line with Citi's expectations, with net revenue increasing 16% year-on-year to $2.058 billion (up 8% quarter-on-quarter). Property EBITDA grew 6% year-on-year to $608 million (up 1% quarter-on-quarter), roughly matching Citi's initial forecast of $616 million but falling 3% below the market consensus of $628 million. Adjusting for luck factors, property EBITDA for the quarter would have been $582 million. The adjusted EBITDA margin decreased by approximately 3.9 percentage points year-on-year to about 28.9%. Citi cited Sands China's management on the analyst call, who mentioned significant expenses incurred from events, with the firm believing the NBA China Games and the 15th National Games accounted for a large portion. This led to a year-on-year decline in the EBITDA margin of 2.7 percentage points (29.5% in Q4 2025; 32.2% in Q4 2024). Considering these events and the quarter's less favorable VIP/mass market revenue mix, Citi views the reported EBITDA margin as an indication that Sands China is still managing its operational expenses effectively. Citi also referenced management's comments on the call, noting that the mass market win rate decreased by about 140 basis points year-on-year, promotional efforts have stabilized, and the company will seek further optimization in 2026.
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