SJM to reopen Jai Alai mid-2016: analysts
Macau gaming firm SJM Holdings Ltd has indicated that it hopes to reopen the revamped Casino Jai Alai – near Macau’s main ferry terminal on the city’s peninsula – in “mid 2016”, said a note from brokerage Sanford C. Bernstein Ltd.
“Jai Alai (adjacent to Oceanus) is slated to reopen in mid-2016 with 130 hotel rooms and a planned 45 gaming tables (most likely all mass). (This is delayed from earlier guidance of spring 2016),” said the note from Vitaly Umansky and his colleagues Simon Zhang and Bo Wen following SJM Holdings’ first half results and referring to another harbourside SJM Holdings property called Casino Oceanus. The casino group last week said its profit fell 54.1 percent year-on-year in the first six months of 2015.
A number of analysts have noted that SJM Holdings is taking steps to ramp up its mass market gaming offer after seeing its share of Macau casino gross gaming revenue (GGR) decline sequentially this year.
“SJM is making some progress to cope with Macau’s paradigm shift to mass; however, the company is still too focused on VIP and satellite business,” wrote Sanford Bernstein. The brokerage was referring firstly to possible long-term changes in the structure of the Macau gaming market – reportedly linked in part to mainland China’s crackdown on corruption and extravagant spending by public and private sector bosses – and secondly to satellite casinos that rely on SJM Holdings’ gaming licence but that are managed by other parties that get a share of the takings.
Analysts say that in the case of the whole Macau market “the new normal” – an echo of a phrase used by Chinese Premier Li Keqiang to describe structural reforms to China’s economy – involves a move away from VIP and premium mass play and toward lower minimum bet mass market gambling.
Grand Lisboa mass zone
Union Gaming Securities Asia Ltd noted – in commentary following SJM Holdings’ results statement – that in the fourth quarter the firm’s Macau flagship property Casino Grand Lisboa would open what Union Gaming referred to as a new dedicated mass market gaming zone in a former restaurant area. Union Gaming said the space would house 11 to 14 table games, adding to Casino Grand Lisboa’s current total of 273 mass market tables.
The move “should help the property maintain its share profile on the peninsula,” said Mr Govertsen.
Sanford Bernstein stated: “In the second quarter, SJM increased its mass tables to 1,235 from 1,209 in the first quarter while reducing its VIP tables to 492 from 530 ; further the number of junket promoters declined from 35 at year-end 2014 to 21 at end of the first half.” The brokerage also noted that SJM Holdings’ management was trying to boost room occupancy at Hotel Grand Lisboa after it fell to 78.8 percent from 81.4 percent in the first quarter. Sanford Bernstein added that Hotel Grand Lisboa had an “historical” occupancy level of approximately 95 percent.
In a note following SJM Holdings’ second quarter results, analysts at Daiwa Securities Group Inc said the firm’s management noted that it; “as a pure gaming company, unlike some of its peers with more non-gaming amenities, would have a harder time cutting back on costs as the company has little flexibility in adjusting staff costs for casino labour”.
“That said, management did highlight a company-wide cost control initiative (at Grand Lisboa and self-promoted casinos), which saw labour cost savings: from not replacing labour lost to natural attrition (i.e. to Galaxy’s new opening); headcount cuts in its administrative operations; as well as voluntary time off for casino staff,” said analysts Jamie Soo, Adrian Chan and Jennifer Wu. The reference to “Galaxy” was to some SJM Holdings staff leaving to join rival Macau casino operator Galaxy Entertainment Group Ltd, which opened its HKD19.6-billion (US$2.5-billion) Galaxy Macau Phase 2 property on May 27.
In early May, SJM Holdings gave analysts at Daiwa guidance that the firm hoped to see Casino Jai Alai reopen “in a year’s time”.
A November 18, 2012, filing from SJM Holdings to the Hong Kong Stock Exchange said Casino Jai Alai would be leased by SJM Holdings from Angela Leong On Kei – who is fourth consort of SJM Holdings’ founder Stanley Ho Hung Sun as well as being an executive director of SJM Holdings – for three years from January 2014.
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