SJM Holdings casino profit up nearly two-thirds

TAGs: Macau, SJM Holdings

sjm-holdings-macau-casino-profitMacau casino operator SJM Holdings reported a nearly two-thirds rise in its third-quarter profits on strong gains across all gaming segments.

On Tuesday, SJM released a preview of its financial performance in the three months ending September 30, during which net gaming revenue improved 9.5% year-on-year to HK$8.33b (US$1.05b), adjusted earnings gained 26.7% to HK$919m and profits shot up 65.1% to HK$707m ($90.1m).

SJM’s VIP gaming revenue was up 6.6% to just over HK$5b despite a 0.14 point reduction in VIP win rate during the quarter (to a still above-average 3.04%). SJM’s VIP tables reported total chip sales up over 12% year-on-year to HK$166b.

But SJM’s good fortune wasn’t dependent on VIPs, as mass market table revenue rose 10.6% to HK$5.6b and even the lowly slot machine segment improved 13.7% to HK$285m.

SJM’s flagship Casino Grand Lisboa had a strong quarter, with total gaming revenue up 11.8% to nearly HK$4.2b. The Grand Lisboa’s hotel reported average occupancy rising 3.2 points to 94% during Q3, despite the average room rate rising HK$118 from Q3 2017.

SJM’s other ‘self-promoted’ casinos contributed revenue of HK$1.6b while the 16 ‘third-party-promoted’ casinso operating under SJM’s concession combined for just under HK$5.2b.

SJM is Macau’s oldest and largest (in terms of properties operating under its gaming concession) casino operator, but its once-dominant revenue market share has been steadily eroding due to its lack of a flash integrated resort property in the Cotai area. After hitting a record low of 16.1% in 2017, SJM’s market share dropped another full point in H1 2018.

On Tuesday, SJM said it was “looking forward” to the opening of its in-development $4.6b Grand Lisboa Palace resort (pictured) on Cotai “in 2019.” However, analysts continue to express concerns that the problem-plagued property, which recently appointed Genting veteran Paul Baker as its new president, may not actually open until late in 2019 or possibly not until 2020.

Whether or not the Palace proves to be SJM’s saving grace may be down to factors other than the options on its gaming floor. A new survey of 500 Macau visitors by the Institute for Tourism (IFT) Studies claims that gaming has “no significant impact” on whether visitors feel an attachment towards – and thus a desire to eventually return to – a particular resort.

The IFT report’s authors claim “light pleasure emotions” were key to ensuring a customer’s “place attachment,” the latter defined as the emotional and functional bonds between place and people, which has been identified as a strong indicator of tourists’ loyalty to a particular destination.

Visitors’ opinions of non-gaming amenities such as dining, shopping, live shows and events were found to “significantly” predict their attachment to a particular resort, while gaming participation had little effect on a visitor’s emotional bond.

In other words, SJM’s new venue needs to ramp up its non-gaming offering well beyond what the company has offered to date. Of the total HK$8.51b revenue that SJM generated in Q3, all but HK$182m came from gaming.


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