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China – Analysts concerned over SJM’s lack of expertise in premium mass gaming

By - 13 September 2019

Having delayed the opening of Grand Lisboa Palace again this time to late 2020, Macau operator SJM Holding has been put under the microscope by analysts at Sanford C Bernstein, who believe the property could struggle to compete on Cotai due to SJM’s lack of experience in premium mass gaming.

SJM has also confirmed that the project’s budget has increased from HK$36bn to HK$39bn.

Sanford C Bernstein analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu said: “The delay in opening and cost escalation came as no surprises to us as we were already modelling a higher cost. We would not be shocked if delays get extended further and the final budget goes higher.”

“With the ‘continuing’ delay in coming to Cotai, SJM is set to continue to lose market share, and even with the eventual opening of Grand Lisboa Palace, there is little to be bullish about. As we have seen from the slower than anticipated ramp up of MGM Cotai, a new property on Cotai is not an easy endeavour.

“The key is premium mass, something SJM has not been able to execute on in the past and will face a steep curve with the Cotai property,’ they added. “We see no company specific catalysts that will benefit the company in the near or medium term (even if mass performance on peninsula has shown some modest improvement). The lack of any strategy to capture the high margin premium mass market and the continued delay in opening Cotai are fundamental problems with management direction and focus.”

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