Macau-based gaming operator SJM Holdings Ltd on Tuesday reported a 16.5 percent year-on-year fall in net profit for the third quarter of 2017, to HKD428 million (US$54.9 million). The company did not provide a reason for the decline in profit.
Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) for the period were HKD726 million, a decline of 10.4 percent from a year earlier.
Ambrose So Shu Fai, SJM Holdings’ chief executive, noted in a statement included in the results announcement that the firm’s gaming revenue, adjusted EBITDA and net profit had showed “a sequential-quarter increase in the third quarter”.
Mr So added that SJM Holdings was still assessing the impact of Typhoon Hato and “other events” in the construction progress of Grand Lisboa Palace, a casino resort being developed in Macau’s Cotai district. The firm said in its results announcement it was still “aiming to complete the project by the end of 2018 on budget”.
The company added: “The group is currently working with its contractors to restore the affected areas as quickly as possible… Meanwhile, the company is conducting a detailed assessment on the overall schedule of the project and will inform the market as and when appropriate.”
Market rival casino operator MGM China Holdings Ltd announced in September it was delaying the opening of casino resort MGM Cotai to January 29, 2018 citing the impact of Typhoon Hato – which struck Macau on August 23 – on the construction site. Following the typhoon – the worst storm recorded in Macau for 53 years – some hotels and casino resorts temporarily suspended their operations for up to one month, as they sustained damage and suffered power cuts and interruption to water supply.
“Typhoon Hato did negatively affect third quarter [results] as SJM Holdings was hit harder than others,” said brokerage Sanford C. Bernstein Ltd in a note on Tuesday.
“The company estimated a [circa] HKD200 million revenue impact, of which HKD140 million was at the old Lisboa [casino hotel]. EBITDA was negatively impacted by [about] HKD30 million,” wrote analysts Vitaly Umansky, Zhen Gong and Cathy Huang.
Work on the HKD36-billion Grand Lisboa Palace was suspended by the Macau government for 44 days this summer after the death of a worker on June 18. Two fires at the site were also reported this year: the first blaze was in March and the second took place in September.
Angela Leong On Kei, an executive director of SJM Holdings, told local media in late September that a delay to the project was “inevitable” following the latest fire at the construction site.
“We are working full speed on construction of the project in Cotai with full confidence in the future of our business and Macau,” Mr So said in his comments included in Tuesday’s release.
“Though [SJM Holdings] management has not yet revised guidance on the opening and construction budget [of Grand Lisboa Palace], we expect the opening of the property to be delayed into 2019,” said the Sanford Bernstein team.
VIP revenue up, mass down
SJM Holdings reported revenue – including gaming, hotel, catering and related services – of approximately HKD10.15 billion for the three months to September 30, up by 0.2 percent from the prior-year period.
SJM Holdings’ gaming revenue increased by 0.6 percent year-on-year to nearly HKD10.02 billion in the third quarter, the firm said.
VIP gaming revenue in the period was HKD4.73 billion, an increase of 7.4 percent from a year earlier. Total VIP chips sales during the third quarter were HKD148 billion compared to HKD152 billion a year earlier. The VIP gaming hold percentage before commissions and discounts was 3.20 percent, up by 0.31 percentage points year-on-year.
Mass-market gaming revenue – excluding slot machines – was HKD5.04 billion, down by 4.6 percent in year-on-year terms. Slot machine and tombola revenue stood at HKD251 million, a decrease of 7.7 percent from a year earlier.
Gaming revenue at flagship property Casino Grand Lisboa (pictured) increased by 19.3 percent year-on-year in the third quarter to approximately HKD3.71 billion, whilst its adjusted EBITDA went up by 2.0 percent to HKD418 million. Gaming revenue in SJM Holdings’ third party-promoted casinos decreased by 10.6 percent year-on-year to HKD4.93 billion, the firm said.
SJM Holdings operated an average of 290 VIP gaming tables in the third quarter, a reduction of 33 tables when compared to the year-earlier period. The firm had 1,368 mass-market tables and 2,632 slot machines in the period.
SJM Holdings underperformed the Macau market both in the VIP and mass market segments. Third quarter VIP revenue market-wide increased by 35.0 percent year-on-year, while mass market revenue – including that from slot machines – was up 7.4 percent, according to official Macau government data.
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Analyst at Roth Capital Partners