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SJM to Buy Share in Land to Triple Size of Casino Resort

SJM Holdings Ltd. (880), Asia’s biggest casino operator, plans to invest in land that will triple the size of its planned casino resort in Macau’s Cotai area.

SJM, founded by gambling mogul Stanley Ho, will buy a stake in a neighboring plot controlled by the mother of Ho’s youngest children, Chief Executive Officer Ambrose So said, without giving a price. SJM plans to finalize terms of the purchase by the end of this year, So said.

SJM is expanding in the increasingly popular Cotai area to catch up with rivals including Sands China Ltd. (1928) and Galaxy Entertainment Group Ltd. (27) in the world’s largest gambling hub. SJM, which runs 20 of Macau’s 35 casinos, has none in Cotai and is the last of the Chinese city’s six casino operators to receive government approval to develop the resort in the area.

“By combining the two pieces of land, we’ll have a bigger site to develop a full-fledged resort,” So said in a Sept. 5 interview in Macau. The expansion will “give us a leg up on competition with other casino operators.”

SJM will use the parcel to expand the non-gambling portion of its first Cotai gambling resort, initially planned on a 70,500-square-meter site.

The 180,000-square-meter expansion site is owned by a company controlled by Angela Leong, SJM’s executive director and a Macau legislator. The plot has been approved for non-gaming entertainment uses.

Photographer: Jerome Favre/Bloomberg

The City of Dreams complex, operated by Melco Crown Entertainment Ltd., is seen from Las Vegas Sands Corp.'s Venetian Macao resort in Macau. Close

The City of Dreams complex, operated by Melco Crown Entertainment Ltd., is seen from... Read More

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Photographer: Jerome Favre/Bloomberg

The City of Dreams complex, operated by Melco Crown Entertainment Ltd., is seen from Las Vegas Sands Corp.'s Venetian Macao resort in Macau.

SJM shares were unchanged at HK$20.15. in Hong Kong trading. The benchmark Hang Seng Index rose 0.6 percent.

Family Appeal

Ninety-one-year-old Ho held a Macau gambling monopoly for four decades until 2002, when the government issued licenses to operators based outside Macau such as Sands and Wynn Resorts Ltd. (WYNN)

Ho was initially reluctant to copy the Las Vegas-style glitz of his U.S. competitors, which added hotels with spas, penthouses and family-style entertainment.

Family-friendly attractions have boosted the appeal of Sands China, controlled by U.S. billionaire Sheldon Adelson and which overtook SJM’s top spot in Macau’s mass-market casino business in the first quarter.

“SJM has grand plans of setting up an integrated resort, there’s no way it can be done on a small plot of land,” said Jeremy Tan, a Hong Kong-based analyst at Kim Eng Securities HK Ltd. “SJM still needs to step up in building non-gaming facilities to compete with rivals as it’ll probably be the last operator to enter Cotai.”

Increased Budget

SJM said last week it will boost the budget for its new resort to HK$25 billion ($3.2 billion) from HK$20 billion because of rising labor and construction costs. The project will have as many as 700 gambling tables, 1,000 slot machines and a luxury hotel in partnership with Italian fashion house Gianni Versace SpA.

Photographer: Jerome Favre/Bloomberg

SJM Holdings Ltd. Chief Executive Officer Ambrose So. Close

SJM Holdings Ltd. Chief Executive Officer Ambrose So.

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Photographer: Jerome Favre/Bloomberg

SJM Holdings Ltd. Chief Executive Officer Ambrose So.

The five-star Palazzo Versace hotel will have as many as 270 rooms and is slated to open in 2017. Construction will begin in the next few months, the company said.

Smallest Site

SJM’s pre-expansion site is the smallest among casino operators that have been granted land in Cotai, the Asia equivalent of the Las Vegas Strip. It is still waiting for the government to grant it a construction permit for the planned resort, while the others have either a presence in the area or have begun construction.

Galaxy Entertainment, controlled by billionaire Lui Che-woo, has 2 million square meters of land, the biggest in the area, according to Yoko Ku, a spokeswoman for the Hong Kong-based company.

MGM China (2282)’s $2.6 billion Cotai resort broke ground in February and will open by mid-2016. Sands is building its fifth resort, to be called the Parisian.

Macau had a record of $38 billion in casino revenue last year, six times that of the Las Vegas Strip. Two-thirds of that came from high-stake bettors mainly made up of mainland Chinese visitors.

Photographer: Jerome Favre/Bloomberg

The Venetian Macau resort and casino, right, is viewed from the Sands Cotai Central casino resort on the Cotai strip in Macau. Close

The Venetian Macau resort and casino, right, is viewed from the Sands Cotai Central... Read More

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Photographer: Jerome Favre/Bloomberg

The Venetian Macau resort and casino, right, is viewed from the Sands Cotai Central casino resort on the Cotai strip in Macau.

SJM last month reported a 12 percent increase in second-quarter earnings, beating analyst estimates as mainland Chinese gamblers spent more at its Macau casinos.

Growth Forecast

Macau gambling revenue from high rollers will probably increase by a percentage in the “mid-teens” in the fourth quarter and the mass-market segment to grow by more than 20 percent, So said.

SJM is also looking to expand into Japan and Taiwan should those countries legalize casinos, he said.

Earlier this year, SJM conducted on-site studies in Taiwan’s Penghu, and Kinmen area close to China, he said.

The company is interested in partnering with a local investor to set up a casino in Japan, he said.

“We can bring technical know-how to a local partner in Japan,” he said, adding that the company would prefer Osaka over Tokyo as the capital is too crowded and doesn’t offer much land for a large development.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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