SJM eyes conservative revenue growth for Macau in 2013

TAGs: Business, Macau, SJM Holdings

SJM HoldingsAs the biggest casino operator by revenue in Macau, SJM Holdings Ltd. understands the casino market in Macau better than anybody. So when the company’s chief executive officer, Ambrose So says that casino revenue in the gambling town will increase by less than 15 percent in 2013, those words carry a little bit of weight.

“It will be in the low teens,” So told Bloomberg during a recent interview in Beijing. “We have a bigger base, so low teens is still very good.”

The prediction isn’t entirely shocking considering that revenue growth in Macau “slowed down” to 14 percent in 2012, so if anything, that figure is expected to stay the same, or dip down a few percentage points. What it won’t be is 42 percent, which was revenue generated by the gambling destination in 2011. The dramatic slow down in revenue last year was largely attributed to the drop in high-stakes gamblers going to Macau in part because of China’s economic slowdown. There was the imposition by the local government to limit casino table additions, which also played a role in the stalling of gambling revenue.

Hong Kong-based analyst at Jefferies Hong Kong Ltd. Leon Liao told Bloomberg that any ambitious expectations for Macau’s revenue growth to go back to its 2011 days isn’t going to happen. “Overall, the economy is not improving and we don’t see demand on the VIP side recovering from last year,” Liao said. “The government is putting in more anti-corruption measures in mainland China and this is also a big risk.”

Analysts from Jeffries Hong Kong have already noticed the slow down in business in the first two months of the year, estimating that revenue expansion from January and February are at 9 percent, short of the 13 percent growth estimate figure for 2013. But that percentage should rebound as the year goes on because of the unique circumstances surrounding the first two months of the year, including the Chinese New Year celebrations, which limited the number of VIPs from gambling in Macau.

For SJM, which owns roughly two-thirds of the casinos in Macau, its revenue pie could also take a hit in 2013, in large part due to the increased competitions brought about by other operators. Sands is scheduled to build its fifth casino in Macau, the Parisian, at a price of $2.5 billion. In addition, other operators, including Wynn Macau and MGM China have been granted formal approval to build their own casinos in the Cotai Strip, something that, ironically, is still to be granted to SJM by the Macau government to develop its own casino resort in the area.


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