Macau casino operator SJM posts worse than expected first half profit as high rollers stay away

South China Morning Post

SJM Holdings, the Macau gaming operator owned by the family of legendary casino mogul Stanley Ho, posted a worse-than-expected net profit for the first half of the year as high rollers continue to shy away from the once-lucrative global gambling capital.

Adjusted earnings before interest, taxes, depreciation and amortisation, or ebitda, tanked 27.8 per cent to HK$1.63 billion, the company said in an exchange statement, falling short of analyst estimates of HK$1.74 billion.

Total revenue tumbled 20.6 per cent to HK$21.13 billion from a year earlier.

The Macau Peninsula-based casino, which has traditionally drawn more high-stakes gamblers in the former Portuguese colony, has found itself in a tight spot as its peers are turning to more profitable tourists and recreational gamblers with a raft of resorts opening in Macau’s popular Cotai area.

“The group’s performance in the second half of 2016 will remain susceptible to the overall economic

performance of the surrounding region, government regulatory policies… as well as to the competitive situation among the casino operators in Macau,” the company said in a statement.

In an interview with the Post before SJM reported its earnings, UOB Kay Hian analyst Hannah Li said; “SJM is seeing its market share shrinking as Cotai is becoming a top destination for tourists instead of Macau Peninsula, where SJM’s casino and hotel operations are currently located.

“In addition, its flagship VIP room business is likely to be hammered by tightening regulations on junket operations,” she said.

SJM is seeing its market share shrinking as Cotai is becoming a top destination for tourists instead of Macau Peninsula
HANNAH LI, UOB KAY HIAN ANALYST

Before the announcement on Monday afternoon, SJM’s stock jumped 3.48 per cent to close at HK$5.05. The shares have lost 3 per cent in the past six months.

The company cut its interim dividend to 6 HK cents per share from 10 HK cents last year .

The company’s VIP-room gambling revenue plummeted 28.5 per cent year on year to HK$10.17 billion, while its mass-market tables raked in HK$10.19 billion, a year-on-year decrease of 11.5 per cent from 2015.

SJM is tipped to open its HK$30 billion Grand Lisboa Palace resort in the Cotai district in the second half of 2017, where hotels and attractions such as Melco Crown’s Studio City and Sands China’s Venetian are clustered.

The Grand Lisboa Palace will comprise three five-star hotels, including a Palazzo Versace Macau hotel and one designed by German fashion guru Karl Lagerfeld, boasting 2,000 rooms as well as up to 500 gaming tables.

SJM said earlier this year that it had slashed 30 to 40 per cent of its VIP tables, while adding more on the main floor catering to mass market gamblers

Macau’s gaming revenue for July registered a smaller-than-expected decline of 4.5 per cent to 17.77 billion patacas from a year earlier, another sign of stabilisation in an industry which increasingly counts on tourists and recreational gamblers, instead of high-stakes gamblers.

MGM China Holdings, another Macau gaming operator co-chaired by Stanley Ho’s daughter Pansy Ho, reported a better-than-expected net income for the first half of the year last Thursday, boosted by premium mass-market gamblers and cost cutting measures.

Source: South China Morning Post

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