SJM Profit Jumps TK Percent As Gamblers Betting More

SJM Holdings Ltd. (880), Asia’s biggest casino company by revenue, posted third-quarter earnings that missed analyst estimates as it faces rising competition in Macau, the world’s largest gambling hub.

Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 8 percent to HK$2.04 billion in the three months to September, it said in a filing to Hong Kong’s stock exchange today. That missed an average estimate of HK$2.11 billion from 10 analysts compiled by Bloomberg.

SJM, founded by Hong Kong tycoon Stanley Ho, faces rising competition as rivals including Sands China Ltd. (1928) and Galaxy Entertainment Group Ltd. (27) have added shops and entertainment shows at their resorts in Macau’s increasingly popular Cotai area, the city’s answer to the Las Vegas strip. SJM currently doesn’t have a casino on Cotai.

Net income climbed 10 percent to HK$1.83 billion during the third quarter from a year earlier, while gaming revenue rose 11 percent to HK$21.1 billion.

SJM shares lost 1.2 percent to close at HK$25.4. The stock has risen 41 percent this year, outperforming the benchmark Hang Seng Index’s 1.8 percent gain.

The operator said in September that it will spend HK$25 billion to build its first Cotai resort that features as many as 700 gambling tables, and a luxury hotel in partnership with Italian fashion house Gianni Versace SpA.

“Constrained by capacity and product competitiveness, SJM’s growth may not be as strong as that of peers for the next three years,” said DS Kim, a Hong Kong-based analyst at BNP Paribas in a research note ahead of the results.

Monopoly

SJM runs 20 out of the 35 casinos in Macau, the only place where casino gambling is legal in China. The local government ended Ho’s four-decade monopoly in 2002 and allowed six companies including Las Vegas Sands, Wynn Resorts Ltd., and MGM Resorts International to build resorts, attracting more gamblers from the mainland.

SJM accounted for 24.3 percent of the city’s casino gaming market in the third quarter, compared with 26.1 percent a year ago.

SJM’s gambling revenue from VIPs, or high rollers rose 8.8 percent in the third quarter, while mass market revenue climbed 18.2 percent, it said.

Gambling revenue in the former Portuguese enclave increased 18 percent to 297.1 billion patacas in the first 10 months of this year, close to the $38 billion revenue raked in last year.

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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