SJM Holdings revenue up, market share down; legacy of Lisboa’s filthy carpets

TAGs: Las Vegas Sands, Macau, mass market, sands china, SJM Holdings

sjm-holdings-grand-lisboa-macauMacau casino operator SJM Holdings reported revenue and earnings growth in the first three months of 2014 but its stock slipped on concerns that rivals on Cotai were stealing SJM’s thunder. SJM’s Q1 gaming revenue rose 4.9% to HKD 22.8b (US $2.9b) while adjusted earnings rose 2.9% to HKD 2.2b ($284m). Profit slipped 1.9% to HKD 1.9b ($245m) but would have risen 3.6% were it not for HKD 106m in share-based payments made during the quarter.

Like its crosstown competition, SJM enjoyed a serious boost at its mass market tables, which saw revenue rise 27.8% to HKD 7.95b while VIP gaming revenue fell 4.1% to HKD 15.1b. However, Macau regulators reclassified a bunch of SJM’s premium mass gaming tables as VIP tables in Q1 2013, making year-on-year comparisons tricky. Were it not for that reclassification, VIP revenue would have been up 2.7% while mass market gains would have fallen to 10% (well below the mass gains experienced by SJM’s competitors). Slot machine revenue fell 12.6% to HKD 330m.

SJM’s share of the overall Macau casino market slipped to 23% from 26.2% in the same period last year. While SJM operates 20 of Macau’s 35 casinos, its facilities are older and for the most part less opulent than the resort casinos other operators have opened on the Cotai strip. All the more reason for SJM to celebrate the groundbreaking this quarter of its first mega property on Cotai, the $4b Versailles-themed Lisboa Palace, which is set to open in 2017.

Deutsche Bank analyst Karen Tang said SJM ceded its role as Macau market leader in Q1, with rival Sands China claiming 23.2% to SJM’s 23%. Barclays analysts suggested SJM’s downward trend would likely continue, given the mass market is driving Macau’s recent gains and the Cotai properties are less VIP-focused than SJM’s peninsula casinos.

However, Portuguese-language newspaper JTM reported that SJM reclaimed its Macau market leader status from Sands China in April. JTM says SJM bagged a 23.4% share of Macau gaming revenue last month, compared to 22.2% for Sands China, while Galaxy Entertainment Group came third with 18.4%.

It was 10 years ago this month that Sands Macao opened, finally ending SJM’s comfortable casino monopoly. Forbes contributor Muhammad Cohen recently recapped the state of Macau’s casino industry when then-SJM boss Stanley Ho held all the chips. Prior to Sands opening its new property, various anonymous Sands execs scouting the area claimed to be mystified by the color schemes at SJM’s flagship property, the Casino Lisboa, which featured solid black carpets and light grey felt on the gaming tables.

At first the Sands execs credited this to feng shui or some equally alien concept but a closer inspection revealed that the carpets were black because they had never once been cleaned, while the table felt had faded from its original green color and the markings had been retraced with magic marker. Turns out that business at the Lisboa’s tables was so brisk – with gamblers standing eight-deep behind the available seats – that SJM didn’t dare interrupt the action long enough to give the place a spring cleaning. It was around this point that Sands decided Macau would be the next center of the gaming universe.


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