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SJM Quarterly Earnings Top Estimate on Higher Spending

SJM First-Half Profit Tops Estimates on Gambler Spending
People take photographs, right, as pedestrians cross an intersection in front of the Casino Lisboa, operated by SJM Holdings Ltd., in Macau. Photographer: Lam Yik Fei/Bloomberg

Aug. 15 (Bloomberg) -- SJM Holdings Ltd., Asia’s biggest casino company, reported a 12 percent increase in second-quarter earnings, beating analyst estimates, as mainland Chinese gamblers spent more at its Macau casinos.

Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, rose to HK$2.14 billion in the three months to June, according to Bloomberg calculations based on its statement to Hong Kong’s stock exchange yesterday. That’s higher than an average estimate of HK$1.99 billion from seven analysts compiled by Bloomberg.

SJM joins MGM China Holdings Ltd. and Melco Crown Entertainment Ltd. in reporting higher profits in Macau, the only place in China where casinos are legal. The operators are benefiting as new attractions, added hotel rooms and an improved rail connection draw more mainland Chinese visitors to the world’s biggest gambling center.

Net income climbed to HK$1.91 billion during the second quarter from HK$1.7 billion a year earlier, according to results calculated by subtracting first-quarter earnings from first-half numbers reported by the company yesterday.

SJM fell 0.1 percent to close at HK$19.94. The benchmark Hang Seng Index was little changed.

SJM, founded by Hong Kong tycoon Stanley Ho, faces rising competition as rivals including Sands China Ltd. and Galaxy Entertainment Group Ltd. expand on Macau’s increasingly popular Cotai strip. It doesn’t have a casino on Cotai, which is Asia’s equivalent of the Las Vegas strip.

Operators have been adding new attractions such as shopping malls and entertainment shows in their resorts to draw mainland Chinese tourists.

Market Share

SJM’s market share in the first half dropped to 25.3 percent, it said in a statement to Hong Kong’s stock exchange yesterday. That’s a decline from the 26.7 percent share in 2012 as competitors opened new properties in Cotai.

SJM’s gambling revenue from VIPs, or high rollers rose 10 percent to HK$29 billion in the first half, while mass market revenue climbed 4 percent to HK$12.2 billion, it said.

The company said it will pay an interim dividend of 20 Hong Kong cents a share, double last year’s payout.

SJM, which formerly had a monopoly in the city, runs 20 out of the 35 casinos in Macau. It won a land grant in October to build its first casino resort in Cotai.

Macau raked in a record $38 billion gross gaming revenue last year, with two-thirds of that coming from the high-stake gamblers, or so-called VIPs. Deutsche Bank AG has estimated that the city’s casino revenue will rise 17 percent to $44.5 billion this 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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