Macau casino operator SJM Holdings Ltd plans to boost by circa 40 percent the number of rooms at its Cotai resort Grand Lisboa Palace (pictured) in time for the Chinese New Year (CNY) holiday that starts on Saturday for mainland Chinese; pushing the total available to 692, said Goldman Sachs (Asia) LLC in a Monday note.
SJM Holdings aimed “to open its second Grand Lisboa Palace Hotel tower ahead of Chinese New Year, increasing its room count by approximately 200 to 692,” said the memo from analysts Simon Cheung, Alpha Wang, Peter Yang, Leah Pan, and Dorothy Wong.
The investment bank cited commentary from the firm, after the institution talked to management at SJM Holdings last week.
The HKD39-billion (US$5-billion) Grand Lisboa Place, SJM Holdings’ foray into Macau’s Cotai market, was launched in July 2021. So far, the casino operator has brought to market “less than one-third” of Grand Lisboa Palace’s total hotel room capacity, i.e., only 504 rooms at its self-branded Grand Lisboa Palace Hotel, and 72 rooms at The Karl Lagerfeld Hotel, the Monday note mentioned.
“By the end of the second quarter in 2023, it [SJM Holdings] targets to fully open the two Grand Lisboa Palace Hotel towers with a total of 1,350 rooms and may also consider launching the premium Palazzo Versace Hotel if the market conditions are supportive,” the note stated.
The management for Grand Lisboa Palace was also looking to launch additional amenities, including more shops, as well as increasing the property’s gaming table count from “158 to 250”, the Goldman Sachs analysts stated. They did not clarify the details of such an increase.
Grand Lisboa Palace generated in the third quarter of 2022, gross revenue of HKD115 million: gross gaming revenue (GGR) of HKD46 million and non-gaming revenue of HKD69 million.
SJM Holdings, in common with its five Macau gaming concessionaire peers, started a new, 10-year concession on January 1. In return for its Macau rights, the company has pledged a total investment of MOP14.03 billion, according to its concession contract.
Out of that, SJM Holdings said it planned to spend MOP12.0 billion on a combination of developing customer-source markets outside China, and on developing non-gaming projects. The non-gaming capital commitment is split evenly between operating expenditure and capital expenditure, noted Goldman Sachs, citing the casino operator’s remarks in a corporate-day discussion.
Of “SJM’s MOP12-billion capital commitment for non-gaming, about half, or MOP6 billion, is capital expenditure including the upgrade/revamp of Grand Lisboa/Hotel Lisboa; MOP2 billion to be incurred by its parent company which owns Hotel Lisboa,” the analysts wrote.
Those were references to the casino group’s flagship casino-hotel properties on Macau peninsula
The Goldman Sachs analysts added: “It [SJM Holdings] will spend the remainder to host non-gaming events and develop a database of international players. These look manageable [targets], representing no more than what it was spending in capital expenditure/operating expenditure before the pandemic.”
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"The six Macau casino operators should not be penalised for upping expenditure on player incentives, so long as their EBITDA margins are not materially diluted”
George Choi and Ryan Cheung
Analysts at Citigroup