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SJM Net Gains 35% as Macau High Rollers Bet More in Casinos

SJM Third-Quarter Net Gains 35% on Rise in High-Rollers
People wallk past two of SJM Holdings Ltd.'s casinos, the Lisboa, right, and the Grand Lisboa, left. Gaming revenue in the city, the only place in China where casinos are legal, rose 45 percent to 221 billion patacas ($27 billion) in the first 10 months of this year. Photographer: Jerome Favre/Bloomberg

SJM Holdings Ltd., Asia’s biggest casino company, reported third-quarter profit that 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 late 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 note to clients yesterday.

Gaming revenue in Macau, 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 the year. Competition is intensifying in the world’s biggest gambling strip, as rivals including Galaxy Entertainment Group Ltd. add casinos. Sands China Ltd. today reported an 11 percent increase in third-quarter revenue.

“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.

Cotai Strip

SJM, at the heart of an ownership dispute earlier this year between billionaire founder Stanley Ho and members of his family, fell 3 percent to HK$14.16 at the 4 p.m. close of trading in Hong Kong. The stock has advanced 15 percent this year compared with a decline of 15 percent in the benchmark Hang Seng index.

The margin for adjusted Ebitda was 8.7 percent in the third quarter, down from the first half, Citigroup analysts George Choi, Anil Daswani, Michael Beer and Raymond Choi said in a report. Slower profit gains suggest that SJM has “lost significant market share,” they said.

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

Galaxy opened its HK$14.9 billion casino resort on Macau’s Cotai Strip in May. Sands China, the Macau unit of casino magnate Sheldon Adelson’s Las Vegas-based company, plans to open the first phase of a project early next year in the same area, where the billionaire has said he aimed to replicate the theme sorts of the U.S. gambling hub.

Grand Lisboa

Sands China’s third-quarter revenue rose to $1.2 billion while net income climbed 41 percent to $281 million, the company said in a filing today.

About 85 percent of Sands China’s third-quarter sales came from the casino business. The Venetian Macao contributed more than half of revenue in the period.

Sands China dropped 3.4 percent to HK$24.05, paring its gain this year to 41 percent.

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.

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