Profit at Macau casino operator SJM Holdings Ltd fell 44.1 percent in the first quarter of 2016, according to unaudited highlights of the business filed to the Hong Kong Stock Exchange on Tuesday.
Such profit was HKD561.0 million (US$72.3 million) in the three months to March 31, compared to HKD1.0 billion in the prior-year period.
The decrease in profit was mainly caused by a 22.8 percent decrease in gaming revenue, said the firm. Such revenue was approximately HKD11.02 billion during the reporting period.
The group’s gaming revenue accounted for 20.2 percent of the Macau market’s casino gaming revenue during the first quarter, as compared with 22.7 percent in the first quarter of 2015.
The group’s VIP gaming revenue for the first three months of 2016 was just under HKD5.61 billion, a decrease of 29.2 percent from the HKD7.92 billion achieved a year earlier.
Total VIP chip sales for the group during the first quarter of 2016 were HKD177.90 billion, compared to HKD247.20 billion in the first quarter of 2015. VIP gaming hold percentage (before commissions and discounts) was 3.15 percent; it was 3.19 percent in the first quarter of 2015.
Mass market gaming revenue for the three months to March 31 was approximately HKD5.15 billion, a decrease of 14.9 percent from the nearly HKD6.05 billion in the prior-year period.
SJM Holdings’ slot machine and tombola revenue in the first quarter of 2016 was HKD267.0 million, a decrease of 14.3 percent in year-on-year terms.
Mass-segment casino gross gaming revenue (GGR) market wide in Macau – including mass table games, slots and live multi game, a category of electronic table game using a live dealer – fell 4.8 percent year-on-year in the first quarter this year. VIP baccarat GGR also showed a slowing in the rate of decline for the segment – 19.3 percent – albeit from a depleted base, show data from the city’s gaming regulator released last month.
During the opening three months of 2016, SJM Holdings operated an average of 369 VIP gaming tables, a sharp decline from the 530-unit average recorded a year earlier. SJM Holdings had an average of 1,298 mass-market gaming tables in the first quarter of 2016, up by 7.4 percent in year-on-year terms; and 2,898 slot machines, an increase of 3.8 percent.
The group’s total revenue of approximately HKD11.15 billion in the first quarter 2016 included revenue from hotel, catering and related services amounting to HKD132.0 million, compared to HKD158.0 million in the prior-year period.
SJM Holdings’ group adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) in the first quarter of 2016 decreased by 32.5 percent year-on-year, to HKD838.0 million.
The adjusted EBITDA margin of the group in first quarter – i.e., adjusted EBITDA divided by total revenue – decreased to 7.5 percent from 8.6 percent in the first quarter of the prior year.
SJM Holdings said in commentary on its highlighted numbers that if discounts paid to players and promoters were deducted from revenue before calculating adjusted EBITDA margin – in the manner it said of casino firms reporting results in the United States – the group’s adjusted EBITDA margin for first quarter 2016 would have been 11.8 percent.
The firm added, referring to the division of its business between core properties and “satellite” ones managed by third parties but using the SJM Holdings’ gaming licence: “If the group’s revenue is further adjusted to include the net revenue of self-promoted casinos plus the net revenue contribution (after reimbursed expenses) of the group’s satellite casinos, the group’s adjusted EBITDA margin would be 22.6 percent.”
During the first quarter of 2016, the group’s flagship property on Macau peninsula – the Grand Lisboa casino hotel (pictured) – achieved an average occupancy rate of 91.6 percent and average room rate of HKD1,660 per night, as compared with average occupancy rate of 81.4 percent and average room rate of HKD2,509 per night in first quarter 2015.
SJM Holdings’ capital expenditure during the first quarter of 2016 was HKD947.0 million, which was primarily for construction in progress. The company is currently building a new casino resort – named Grand Lisboa Palace – in Macau’s Cotai district. The property is scheduled for completion in 2017.
As at March 31, SJM Holdings had total cash, bank balances and pledged bank deposits of nearly HKD16.98 billion and debt of HKD676.0 million.
Ambrose So Shu Fai, chief executive of SJM Holdings, said in a press statement accompanying the results highlights: “Though the challenging environment in the gaming market persisted into 2016, there are signs of stabilisation, particularly in the mass market segment. We are pleased to note in the recent quarter an increase in SJM’s adjusted EBITDA margin from the fourth quarter of 2015.”
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"The Hong Kong protests may hurt Macau gross gaming revenue by about mid-single-digit (i.e., half of maximum visitation exposure), which should fade away gradually as people will find alternative ways to visit Macau”
DS Kim, Jeremy An and Christine Wang
Analysts at brokerage JP Morgan Securities (Asia Pacific) Ltd