SJM’s Q1 revenue flat but profits jump on mass market strength

TAGs: Macau, SJM Holdings

sjm-holdings-mass-market-gamingMacau casino operator SJM Holdings reported flat Q1 revenue but rising profits thanks to an improved mass market gaming performance.

On Tuesday, SJM released selected unaudited key performance indicators for the first three months of 2019, during which net gaming revenue improved 0.8% year-on-year to nearly HK$8.5b (US$1.08b), adjusted earnings improved 8.9% to HK$1.075b and profit jumped 16.5% to HK$850m.

SJM’s year-on-year improvement in gaming revenue, however modest, was entirely due to its mass market sector. Its VIP gaming tables reported revenue falling nearly one-fifth to a little over HK$3.9b while mass market table revenue was up 7.9% to nearly HK$6.2b. Slots revenue continued to be the equivalent of a rounding error, slipping 1.3% to HK$290m.

The VIP slide came despite VIP gaming win rising more than half a point to 3.2% during Q1. The true VIP culprit was a nearly 31% decline in VIP turnover.

SJM’s performance reflects the broader trends on display across the Macau marketplace in Q1, which saw mass market gaming surge to 51.1% of total gambling revenue, the first time the mass segment has outperformed its flashier VIP cousin. Analysts expect this trend to continue for the rest of the year as China’s economy slows and high-rollers cut back on unnecessary luxuries like showing off in Macau.

The varying fortunes of SJM’s VIP/mass segments were accomplished despite precious little change in the number of tables devoted to each at SJM’s casinos. The company had an average of 280 (-4) VIP tables in operation during Q1 while mass tables averaged 1,410 (-7).

SJM’s non-gaming revenue totaled a mere HK$182m, essentially flat year-on-year. Occupancy at the company’s flagship Grand Lisboa Hotel was down 2.5 points to 94.7% despite the average room rate falling 5%.

SJM’s Q1 preview said little about its in-development Grand Lisboa Palace integrated resort, which will be the company’s first property in the Cotai region when it opens later this year. SJM said only that the project “continued to make progress on construction” during the quarter. SJM is currently the only one of Macau’s six casino concessionaires yet to open a Cotai property.


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