GGRAsia – SJM 1H loss down 54pct, first positive EBITDA since 2019

SJM 1H loss down 54pct, first positive EBITDA since 2019

Aug 21, 2023 Newsdesk Latest News, Macau, Top of the deck

The first-half loss at Macau gaming operator SJM Holdings Ltd narrowed to HKD1.26 billion (US$161.3 million), a 54.1-percent improvement on the prior-year period’s nearly-HKD2.76 billion loss, as the firm also returned to positive adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) for the first time since 2019.

The information was in a Monday filing to the Hong Kong Stock Exchange after trading hours. The firm said in a separate press release that it “continues progress in the post-pandemic era”.

Daisy Ho Chiu Fung, chairman of SJM Holdings and managing director of the Macau concession holder SJM Resorts SA, was quoted saying in the press release that the latest numbers “reveal the first six-month period of positive adjusted EBITDA since 2019”.

She added, referring first to the group’s successful application for a new 10-year gaming concession that started in January, and secondly to the group’s HKD39-billion Cotai resort which opened in July 2021, in the middle of the pandemic crisis: “We have begun our programme of non-gaming events and investments under the new concession and continued the ramp-up of Grand Lisboa Palace resort. As Macau recovers steadily from the pandemic, we are facing the future with optimism.”

The press release said the firm had in the first half a 11.8-percent share of Macau’s gaming revenue, including 14.9 percent of mass market table gross gaming revenue (GGR) and 3.5 percent of VIP GGR.

In first-half 2022, it had reported a 16.0-percent share of Macau’s gaming revenue, including 20.1 percent of mass market table GGR, and 5.8 percent of VIP GGR.

The first-half 2023 group result was on revenue for the six months to June 30 that rose 126.7 percent year-on-year, to HKD9.36 billion.

The 2022 period had been affected by travel restrictions linked to the Covid-19 pandemic, with such restrictions only being lifted in January this year.

First-half net gaming revenue this year was just under HKD8.70 billion, up 128.2 percent year-on-year.

Adjusted EBITDA was a positive HKD461 million compared to a first-half 2022 loss on adjusted EBITDA of nearly HKD1.18 billion, the latest figure an improvement of 139.2 percent.

Second-quarter group EBITDA represented “a meagre 43 percent recovery versus second-quarter 2019,” and compared to the industry’s “70 percent” recovery rate in the second quarter relative to 2019, said JP Morgan Securities (Asia Pacific) Ltd in a Monday memo.

Satellite venues still dragging costs

Analysts DS Kim, Mufan Shi and Selina Li added, referring first to core SJM Holdings properties, and second to third-party controlled venues: “Self-promoted casinos performed better than expected across the board, but meaningful losses at satellite casinos lingered in the second quarter [at a negative] HKD103 million versus negative HKD105 million in the first quarter.”

The brokerage said – citing management commentary after the results – that SJM Holdings still had in the second quarter 2,150 staff that JP Morgan referred to as “excess”, compared to circa 2,700 such staff at the end of last year.

“The pace of rationalisation of excess staff – from five satellite casinos that ceased operation last year – was much slower than expected,” stated JP Morgan.

SJM Holdings had “incurred HKD169-million of redundant payroll in the second quarter,” the brokerage added. “The company targets to ‘fully rationalise’ its workforce by the end of 2025, so there still appears to be a long way to go,” further noted the analysts.

SJM Holdings’ board did not offer an interim dividend for the six months to June 30.

Gross revenue for Grand Lisboa Palace (pictured) was HKD1.43 billion, including GGR of HKD1.03 billion and non-gaming revenue of HKD396 million; compared with GGR of HKD231 million and non-gaming revenue HKD186 million in the first half of 2022.

Grand Lisboa Palace’s adjusted property EBITDA was a negative HKD292 million, as compared with a negative HKD483 million in the first half last year.

SJM Holdings had an “EBITDA miss in the second quarter”, in relation to market expectations, but “Grand Lisboa Palace turned EBITDA positive in the third quarter,” suggested a Monday note from Morgan Stanley Asia Ltd analysts Praveen Choudhary and Gareth Leung.

The earnings potential of Grand Lisboa Palace is “underappreciated by the market”, said a recent research note by UBS Securities Asia Ltd.

On Macau peninsula, SJM Holdings’ Grand Lisboa casino hotel generated first-half gross revenue of HKD2.40 billion, including GGR of nearly HKD2.27 billion, and non-gaming revenue of HKD137 million. That was versus HKD705-million GGR and HKD71-million non-gaming revenue in the prior-year period.

Grand Lisboa’s adjusted property EBITDA was a positive HKD473 million, as compared with a negative HKD374 million in the first half last year.

As of June 30 this year, the group had nearly HKD4.96-billion in cash, bank balances, short-term bank deposits and pledged bank deposits; and just under HKD28.54-billion of debt.

The group noted that on June 20, 2022, it had completed a refinancing of its syndicated banking facilities, consisting of a HKD9.00-billion term loan and HKD10.00-billion revolving credit, of which HKD3.30-billion was undrawn as of June 30 this year.

(Updated 9.29am, Aug 22)