SJM Third-Quarter Net Gains 35% on Rise in High-Rollers

SJM Holdings Ltd. (880), Asia’s biggest casino company by sales, said third-quarter profit rose 35 percent as high-stakes gamblers bet more on card games at its flagship Casino Grand Lisboa.

Net income climbed to HK$1.2 billion ($154 million) from HK$867 million a year earlier, the company said in a filing to Hong Kong stock exchange filing yesterday. Earnings before interest, taxes, depreciation and amortization fell relative to sales in the third quarter compared with the first half, Citigroup Inc. said in a Nov. 7 report.

Gaming revenue in the city, the only place in China where casinos are legal, rose 45 percent to 221 billion patacas ($27.6 billion) in the first 10 months of this year. Competition is intensifying in the world’s biggest gambling strip, as rivals including Galaxy Entertainment Group Ltd. open new casinos.

“It’s almost certain that SJM will lose market share going forward,” said Philip Tulk, an analyst at Royal Bank of Scotland Group Plc. in Hong Kong. “It has been hugely impacted by the opening of Galaxy.” SJM’s EBITDA missed Tulk’s estimates by 6 percent.

SJM, at the heart of an ownership dispute earlier this year between billionaire founder Stanley Ho and members of his family, fell 2.7 percent to HK$14.20 at 10:26 a.m. in Hong Kong trading. The stock has advanced 15 percent this year compared with a decline of 14 percent in the benchmark Hang Seng index.

The profit margin for adjusted EBITDA was 8.7 percent in the third quarter, down from the first half, Citigroup said. Slower profit gains suggest that SJM has “lost significant market share” in revenue and income terms, it said.

Sands China

SJM said in August that it would face “new competition” this year and next with casinos opening on Macau’s Cotai Strip.

Sands China Ltd. (1928), owned by billionaire Sheldon Adelson, plans to open the first phase of a project early next year on the Cotai Strip, where it also built the Venetian Macao.

Sands China’s third-quarter profit rose 42 percent from a year earlier to $278.3 million, parent Las Vegas Sands Corp. (LVS) said Oct. 28.

SJM said revenue from the biggest-spending gamblers jumped 42 percent in the third quarter to HK$13.3 billion, outpacing the 36 percent gain in total sales to HK$19.1 billion.

Revenue at Casino Grand Lisboa increased 60 percent to HK$5.83 billion in the quarter, according to the statement. The Grand Lisboa Hotel had an average occupancy rate of 95 percent at an average room rate of HK$2,015 a night during the quarter, compared with a 78 occupancy rate at HK$1,889 a year earlier.

The company’s gambling revenue accounted for 28 percent of Macau’s casino market during the quarter, compared with 30 percent a year earlier.

The city’s visitor arrivals during the Chinese national holiday week rose 13 percent from a year earlier to 775,968, according to the city’s tourism bureau.

To contact the reporters on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net; Vinicy Chan in Hong Kong at Vchan91@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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