Profit at Macau casino operator SJM Holdings Ltd fell 38.7 percent year-on-year in the first half of 2016, the firm said in a filing on Monday to the Hong Kong Stock Exchange.
The profit for the six months to June 30 was approximately HKD1.10 billion (US$141.4 million), compared to approximately HKD1.79 billion in the year-prior period.
SJM Holdings reported adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of HKD1.63 billion, down 27.8 percent year-on-year. The group’s adjusted EBITDA margin – on a Hong Kong generally accepted accounting principles basis – decreased to 7.7 percent in the first half of 2016, from 8.5 percent in the year-earlier period.
The casino firm posted total revenue of HKD21.13 billion for the six months to June 30, down 20.6 percent from the prior-year period. Gaming revenue fell by 20.7 percent year-on-year to HKD20.88 billion. It still accounted for 98.8 percent of the firm’s total revenue.
Revenue from VIP play slipped 28.5 percent from a year earlier, to HKD10.17 billion. The VIP decline allowed the mass-market table segment to take the dominant position in the first six months of 2016, with such revenue reaching nearly HKD10.18 billion; a more modest decline of 11.5 percent from the prior-year period.
Revenue from slot machines stood at HKD536.8 million in the first half of 2016; an 8.3 percent decline compared to the HKD585.4 million generated in the prior-year period. Revenue from mass-market tables and slot machines accounted for 51.3 percent of SJM Holdings’ first half gaming revenue.
As at June 30, SJM Holdings had 341 VIP gaming tables in operation, as compared with 386 VIP gaming tables at the end of 2015. The company operated a total of 1,302 mass-market gaming tables in its casinos at the end of June, up from 1,247 mass-market gaming tables as at December 31, 2015.
SJM Holdings said that during the first half it had a 20.0 percent share of Macau’s gaming revenue, compared with 22.3 percent in the corresponding period last year. Its share included 23.1 percent of mass-market table gaming revenue and 18.4 percent of VIP gaming revenue, the company said in Monday’s filing.
For the second quarter alone, SJM Holdings recorded total gaming revenue of about HKD9.9 billion, down 18 percent from a year earlier, according to investment analysts. The firm reported adjusted EBTIDA of HKD796 million for the three months to June 30, a decline of 22 percent year-on-year, while its EBITDA margin improved 50 basis points sequentially to 8.0 percent; but it was still down from 8.4 percent in the second quarter of 2015.
“While SJM effectively held its own during the second quarter of 2016, we expect cash flow to decline notably from here on the heels of new competition,” said analyst Grant Govertsen of Union Gaming Securities Asia Ltd.
Two major new casino resorts – Wynn Palace from Wynn Macau Ltd and the Parisian Macao from Sands China Ltd – are due to open on August 22 and September 13 respectively.
Morgan Stanley Asia Ltd said the second quarter stabilisation in SJM Holdings’ operations was mainly because no new casinos opened.
“We see new Cotai openings taking share from [Macau] peninsula casinos and SJM may have limited cost-cutting opportunities,” said analysts Praveen Choudhary and Alex Poon.
SJM Holdings’ flagship Casino Grand Lisboa (pictured) saw its revenue and adjusted property EBITDA decline by 25.3 percent and 30.8 percent respectively, as compared to the year-earlier period.
Brokerage Sanford C. Bernstein Ltd said Grand Lisboa and other self-promoted casinos performed “better than expected”, while the performance of satellite casinos and non-gaming revenue “was much weaker than expected”.
On a conference call with analysts, the casino operator’s management noted that the mass-market segment “continues to show a stabilising trend,” according to Monday’s note from Sanford Bernstein.
“July showed normal seasonal month-on-month growth while August was better following the negative impact from the typhoon that hit Hong Kong early in the week,” said analysts Vitaly Umansky and Clifford Kurz.
“The company has also not been seeing any negative impact on its premium/VIP marketing events from the coming Wynn Palace opening,” they added.
The casino firm additionally said in its filing it was making “good progress” on Grand Lisboa Palace, its new casino resort in the Cotai district of Macau. The scheme has a price tag of HKD30 billion. SJM Holdings said it is currently in discussions to secure bank financing arrangements later this year to finance construction of the Grand Lisboa Palace.
SJM Holdings’ Cotai scheme remains on track for a late 2017 construction completion, according to the firm’s management. Both Union Gaming and Sanford Bernstein said they expect “an early 2018 opening” for Grand Lisboa Palace.
“We are continuing to make good progress on construction of our Grand Lisboa Palace integrated resort, and around the end of the year we expect to complete the renovation of the Jai Alai complex as well as important renovations of the lobby and hotel rooms at Grand Lisboa,” said SJM Holdings chief executive, Ambrose So Shu Fai, in a statement.
On Monday, the firm’s board authorised an interim dividend of HKD0.06 per ordinary share for the reporting period. It is likely to be paid on September 14, to shareholders registered as of September 2. In the prior-year period, SJM Holdings paid a dividend of HKD0.10 per ordinary share.
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”Given that the blanket casino closure [in Macau due to Typhoon Mangkhut] happened on an all-important weekend day… we expect that somewhere between MOP1.1 billion [US$136.2 million] and MOP1.5 billion in GGR will be lost”
Analyst at Union Gaming Securities Asia