sjm-holdings-casino-smoking-failMacau casino operator SJM Holdings boosted profits 10.3% to HKD1.83b (US $236m) in the three months ending Sept. 30. SJM, which operates the Casino Grand Lisboa, the Casino Lisboa, Casino Oceanus at Jai Alai as well as 14 third party-promoted casinos in Macau, saw overall gaming revenue rise 11.4% to HKD21b, while earnings rose 8% to HKD2.043b. For the first nine months of 2013, SJM’s gaming revenue is up 9.2%, earnings are up 10.4% and profit is up 11.6%.

SJM’s VIP gaming revenue rose 8.8% to HKD13.575b. Total VIP chip sales in the quarter were HKD488.8b, up significantly from Q3 2012’s HKD409.1b, but VIP hold fell to 2.75% from 2.92%. Mass market gaming revenue was up 18.2% to HKD7.14b, while SJM’s slots revenue fell 8.5% to HKD339m.

Despite the positive momentum, SJM’s share of Q3’s overall Macau casino gaming revenue shrunk to 24.3% from 26.1% in Q3 2012 as other operators – notably, Sands China and the surging Galaxy Entertainment – increase their own slices of the pie. SJM is the last of Macau’s six casino concessionaires to begin construction of a property on Cotai, and analysts are projecting SJM’s share of the overall pie will continue to shrink until its Cotai property opens in 2017.

SJM’s existing facilities on Macau’s peninsula include many of the gaming hub’s oldest establishments, which resulted in SJM being overrepresented among the 16 casinos that failed Macau’s second round of air quality tests. Last week, Macau regulators informed the 16 smog factories that their designated smoking areas would be penalized by a 10% reduction in floor space. The laggard operators have been given 30 days in which to draw up plans for the area reductions, which need to be implemented by January 2014. Failure to meet those deadlines could result in the closure of a casino’s entire smoking area, leaving their diehard smoking customers no recourse but to gamble elsewhere.

SJM CEO Ambrose So has protested that the smoking laws unfairly penalize his company, in that some of SJM’s aging buildings are nearly impossible to retrofit to obtain passable air quality readings. SJM executive director Angela Leong On Kei has joined So in calling for a complete smoking ban across all facilities, a measure that would penalize all operators, including those whose overall air quality readings were deemed sufficiently smoke-free.

Macau’s Health Bureau doesn’t appear to be willing to cut SJM any slack, although director Lei Chin Ion acknowledged that shrinking the designated smoking areas likely wouldn’t decrease the number of overall smokers, meaning the air in these areas will get even more toxic regardless of what’s going on in the rest of the casino. All the same, the bureau maintains that if these laggard facilities fail a third air quality test, a further 10% reduction would be imposed, leaving only a few more tests before their smoking areas shrink to the size of phone booths.