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China – SJM shows marked improvement but analysts ‘remain on the sidelines’

By - 31 October 2018

Sociedade de Jogos de Macau, (SJM Holdings) the operator who once ran every casino in Macau, has finally had something to shout about with its third quarter earnings although analysts gave a rather muted appraisal.

SJM has been left behind somewhat with the migration of players to Cotai although it said: “Construction of the Grand Lisboa Palace, the group’s integrated resort on Cotai, is proceeding apace and the group is looking forward to its opening in 2019.”

Whilst revenue growth improved, the stand out figures in its third quarter financials was profit. Profit came in at HK$707m, an increase of 65.1 per cent over Q3 2017, and for the nine months ended 30 September 2018, was HK$2,205m, an increase of 59.4 per cent from the first nine months of 2017.

At HK$8,328m, gaming revenues showed an increase of 9.5 per cent from Q3 2017 with a similar increase for the year so far.

Analysts at Sanford C. Bernstein said: “We see nothing so far to get us upbeat on the stock, as such we remain on the sidelines. The company expects HKD4.8bn [to be invested] for the fourth quarter 2018, and the accumulated capital expenditure was HKD25.1bn at end of third quarter 2018.”

Union Gaming’s Grant Govertson added: “We continue to expect the satellite segment to under perform the market as customers vote with their feet and increasingly patronise Cotai properties.”

Adjusted EBITDA also improved hitting HK$919m in Q3. The group’s flagship casino performed well with Casino Grand Lisboa generating GGR of HK$4,174m, an increase of 11.8 per cent from Q3 2017.

The group’s VIP gross gaming revenue was HK$5,039m, an increase of 6.6 per cent, mass market gross gaming revenue was HK$5,623m, an increase of 10.6 per cent from HK$5,084m, and slot machine gross gaming revenue was HK$285m, an increase of 13.7 per cent from HK$251m.

Dr. Ambrose So, Vice-Chairman and Chief Executive Officer of SJM Holdings Limited, said: “SJM continued to turn in solid results in the third quarter of 2018, with good growth in the group’s Revenue, Adjusted EBITDA and Net Profit, compared with the previous year. At the same time, construction work on the Grand Lisboa Palace has progressed at full speed, as we look forward to its opening next year.”

The company confirmed it is building another Cotai casino adjacent to the Grand Lisboa Palace called Lisboeta Macau. It will 820 rooms and will open in 2020.

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