Macau-based gaming operator SJM Holdings Ltd on Tuesday reported a 80.2 percent year-on-year increase in net profit for the third quarter of 2016, to HKD513 million (US$66.2 million). The company’s profit in the prior-year period included one-off items from an impairment loss of HKD250 million, the company said.
The firm said a HKD128-million unrealised gain “was recognised in other comprehensive income and credited to investment revaluation reserve” in the three months to September 30, 2016.
SJM Holdings reported gaming revenue of approximately HKD9.99 billion for the three months to September 30, down by 11.1 percent from the prior-year period. The tally included approximately HKD5.52-billion gaming revenue generated from 14 third-party casinos – venues using SJM Holdings’ gaming licence but managed by third parties.
Group adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) decreased by 8.4 percent year-on-year to HKD810 million in the third quarter, the firm said. Adjusted EBITDA margin for the period increased to 8.0 percent from 7.8 percent a year earlier.
Ambrose So Shu Fai, SJM Holdings’ chief executive, said in a statement: “SJM’s operating margin improved in the third quarter due to stabilising gaming revenue in Macau and the impact of our cost-controlling measures. We are also pleased to note a sequential-quarter increase in SJM’s gaming revenue, led by mass market operations.”
In the third quarter, SJM Holdings recorded VIP gaming revenue of HKD4.40 billion, down by 19.1 percent from the prior-year period. VIP chip sales totalled HKD152 billion in the period, and the VIP gaming hold percentage – before commissions and discounts – was 2.89 percent, down from 3.36 percent in the third quarter 2015, said the firm.
Revenue from the mass-market segment stood at approximately HKD5.32 million, a decrease of 3.8 percent year-on-year.
“SJM commentary from the earnings conference call highlighted improving trends largely driven by improvements in mass market volume,” said analyst Christopher Jones of the Buckingham Research Group in a Tuesday note.
He added: “However, management did also note that conversations with junket partners suggested that VIP customers are returning to Macau as well, noting the customers they haven’t seen in some time, are starting to return.”
SJM Holdings operated an average of 323 VIP gaming tables and 1,311 mass-market gaming tables during the third quarter this year. The company operated a total of 2,748 slot machines in the period, it said.
Grand Lisboa performance
Gaming revenue at flagship property Casino Grand Lisboa (pictured) fell 11.6 percent year-on-year to HKD3.13 billion in the third quarter, whilst the property’s adjusted EBITDA decreased by 19.3 percent to HKD410 million.
For the nine months ended September 30, Casino Grand Lisboa’s gaming revenue was HKD9.97 billion, a decrease of 21.5 percent from the prior-year period. Adjusted EBITDA for the nine-month period was HKD1.26 billion, down by 27.4 percent.
For the first nine months of 2016, SJM Holdings’ gaming revenue stood at nearly HKD30.88 billion, a 17.8-percent contraction judged in year-on-year terms. Adjusted EBITDA for the period declined by 22.3 percent year-on-year to HKD2.44 billion.
The firm’s net profit for the nine months to September 30 was HKD1.61 billion, down by 22.4 percent from the first nine months of 2015.
SJM Holdings management said capital expenditure during the third quarter amounted to HKD1.92 billion, “which was primarily for construction in progress and furniture, fixtures and equipment”.
“During the third quarter we completed the renovation of the lobby and hotel rooms at the Grand Lisboa, and the Jai Alai complex is due to reopen around the end of the year,” said SJM Holdings’ CEO.
Mr So added that the company continues to make “substantial progress” on construction of the Grand Lisboa Palace, the firm’s new casino resort in the Cotai district. The property is likely to open in early 2018, Mr So had said in comments to the media in August.
Brokerage Sanford C. Bernstein Ltd wrote in a Tuesday note that SJM Holdings management said on a conference call following the third quarter results announcement that the firm had reached agreements with local banks and other financial entities on a loan of HKD25 billion to finance the construction of Grand Lisboa Palace.
(Updated at 8.49am, Nov 2)
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"We forecast Grand Lisboa Palace will have EBITDA of HKD2.0 billion (US$260 million) with 330 tables by 2022, and HKD3.5 billion with 380 tables by 2023"
Credit rating agency Fitch Ratings