GGRAsia – SJM centralises operations to boost efficiency, earnings: CBRE

SJM centralises operations to boost efficiency, earnings: CBRE

Mar 08, 2024 Newsdesk Latest News, Macau, Top of the deck

Management of Macau casino operator SJM Holdings Ltd has mentioned having “promising results” so far this year following the introduction in late December of a new “centralised platform” to manage its self-promoted properties and reposition existing satellite casinos.

“The company is making changes to reposition these casinos through integration with the company’s new centralised operating and service platform launched in late December, aimed at boosting efficiency and demand,” observed CBRE Capital Advisors Inc in a Thursday memo.

“Management spoke to promising results under its ‘One Platform’ so far into the first quarter of 2024,” wrote analysts John DeCree and Max Marsh, after the firm’s conference call with investment analysts, following the group’s full-year results issued on Wednesday.

Among Macau gaming concessionaires with satellite casino interests, SJM Holdings has the greatest number. As of December 31, the nine satellite casinos that use its licence generated aggregate gross gaming revenue (GGR) of nearly HKD8.65 billion (US$1.11 billion), up 128.3 percent year-on-year.

But these satellite properties also collectively generated negative adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) amounting to HKD338 million in 2023, though that was narrowed from the negative HKD635 million in the previous year.

SJM Holdings results have also been weighed down what analysts describe as “excess staff costs” linked to the closure of five satellite casinos in December 2022.

According to CBRE, the firm’s management cited “HKD132 million of excess costs” in the final quarter of 2023. Such redundant payroll stood at HKD148 million in the third quarter, as per information previously disclosed by the company.

The casino firm has been trying to rationalise the complement of excess staff from five satellite casinos that ceased operation last year, according to previous commentary from several gaming sector analysts. Some analysts had observed that the pace of this process had been “much slower” than the investment community anticipated.

SJM Holdings’ management had said it expected to “fully digest by 2025″ the “excess” headcount cost.

In the three months to December 31, SJM Holdings reported a GGR market share of 12.2 percent, down compared with 14.8 percent in the same period of 2019.

“The new concession environment has further shifted the centre of gravity away from these legacy properties in multiple ways, including through the elimination of most junkets, concentrated investment at larger resorts on Cotai, and an increasing focus on non-gaming and international mass market customers,” noted CBRE.

But the Grand Lisboa Palace property (pictured) in Cotai reported its “first quarter of profitability,” with HKD2 million of positive EBITDA in fourth-quarter 2023, added the institution.

“We attribute the inflection to flowthrough on incremental revenue, as operational expenditure per day increased 4.6 percent quarter-on-quarter to HKD6.5 million while GGR grew 11.8 percent quarter-on-quarter,” said the CBRE analysts.

They added: “The property should also benefit from the integrated ‘One Platform’ through synergies with Grand Lisboa. Since the platform’s launch, visitation to the property is up 12 percent and non-rolling volumes are up circa 25 percent over fourth-quarter 2023.”

CBRE also quoted the SJM Holdings’ management as saying that the new centralised platform “has delivered a 29-percent increase in labour productivity compared to 2019”.

SJM Holdings “expects the new initiative will improve company-wide margins by 2 percent to 5 percent,” stated the analysts. “On the revenue side, cross-selling customers can help plug the gaps at different properties and improve customer monetisation.”