SJM Q1 results just top forecasts, helped by satellite casinos

SJM Holdings, which operates Macau’s Grand Lisboa amongst its properties, reported a sharp drop in Q1 profit and revenue, but the results beat analysts’ expectations.

Overall gaming revenue decreased by 22.8 percent to HK$11.02 billion ($1.42 billion), with VIP revenue down 29.2 percent to $5.6 billion, while mass was down 14.9 percent at $5.14 billion

Profit attributable to owners of the company decreased by 44.1 percent over Q1 2015 to HK$561 million, while adjusted EBITDA dropped by 32.5 percent to HK$838 million.

“Grand Lisboa and Mass were weaker than we had expected, but other self-promoted casinos and satellites were better than we had estimated,” Bernstein wrote in a note. However, the firm adds that SJM is likely to continue to trade at a discount to peers due to “over reliance on VIP and satellite business, conflicts of interest, complicated shareholder structure and governance concerns.”

The company said its $4 billion Grand Lisboa Palace project on Cotai continued to make progress during the quarter, with completion scheduled for the end of 2017.

During Q1 2016, SJM operated an average of 369 VIP gaming tables down from 530 a year earlier, 1,298 mass market gaming tables up from 1,209 and 2,898 slot machines.

The group’s market share dropped to 20.2 percent of Macau’s casino gaming revenue compared with 22.7 percent a year earlier.

Union Gaming wrote in a note that although the results beat estimates, they compared unfavorably with its peers.

“The total GGR decline at SJM of 23 percent compared unfavorably to the market down 13 percent, although this isn’t surprising and we look for market share erosion to continue in the quarters ahead as incremental new supply comes online in Cotai,” it said.

The VIP decline of 29 percent compared to a 19 percent drop  for the market overall, while the mass decrease of 15 percent, compared with 5 percent for the market.