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China – SJM’s profit improves despite market share falling again

By - 3 May 2018

With its share of the Macau gaming market falling further to a record low of 14.7 per cent, the once monopolistic force of SJM Holdings would have been delighted to at least post an increase during the first quarter of the year.

The company, which is still working on opening its first casino in Cotai, has been left behind by some of the fast-moving developments of its rivals in the market. Its profit in the first quarter of 2018 has taken a huge uptick though improving by 25 per cent.

Gaming revenue came in at HK$8,410m in Q1 2018, an increase of 6.7 per cent from Q1 2017, despite the group’s VIP gross gaming revenue taking a dip to HK$4,881m, a slight decrease of 1.1 per cent . The mass market increased by 9.5 per cent to HK$5,741m with slots up 14.6 per cent.

The group’s shift towards mass gaming was evident in its product split. During the first quarter of 2018, SJM operated an average of 284 VIP gaming tables, down from 315 a year earlier, 1,417 mass market gaming tables up from 1,375 and 2,700 slot machines up from 2,549.

Dr. Ambrose So, Chief Executive Officer of SJM Holdings Limited, said: “We are very pleased that our efforts to strengthen mass market and VIP businesses combined with cost controls have resulted in material increases in SJM’s EBITDA and Net Profit during the first quarter. We strive to continue enhancing our business on Macau Peninsula whilst we complete construction of the Grand Lisboa Palace on Cotai.”

Alongside delays to its $4.6bn Grand Lisboa Palace, SJM is facing further uncertainty due to the planned departure of Stanley Ho, its long term Managing Director and Founder, in June this year.

The company announced a series of appointments to counter Ho’s departure. His daughter Daisy Ho will come in as Chairman and Executive Eirector. Timothy Fok and Stanley Ho’s fourth wife, Angela Leong, have been appointed co-chairmen and executive directors whilst Ambrose So will be Vice-Chairman and Executive Director. Mr. Ho’s third wife, Ina Chan, will take on a role as Executive Director.

Some analysts have been left underwhelmed though.

JP Morgan’s DS Kim said: “This complicated structure, in our view, leaves room for a potential power tussle within the board given the lack of clear control.”

Sanford C. Bernstein Analyst Vitaly Umansky added: “Instead of using Stanley Ho’s retirement as an impetus to make governance and management changes, the company has opted to further entrench the status quo.”

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