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SJM assessing its Cotai construction schedule as 3Q17 results fall short

Tuesday, 31 October 2017 21:25
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Macau concessionaire SJM Holdings Ltd says it is in the process of conducting a detailed assessment of the construction schedule for its HK$36 billion integrated resort, Grand Lisboa Palace, amid growing concerns its opening will be delayed until 2019.

For now the company is still holding out hope of a 4Q18 launch, which can’t come soon enough after SJM’s third quarter revenue results, announced Tuesday, highlighted its struggles to gain traction without a presence in Cotai.

But a definitive date won’t be known until the assessment is complete following a series of unexpected disruptions in 2017, including damage from Typhoon Hato, two on-site fires and the tragic death of a worker in June that saw construction suspended for six weeks.

“The group is currently working with its contractors to restore the affected areas as quickly as possible with the aim of completing the project by the end of 2018,” SJM said in its earnings announcement.

“The company is conducting a detailed assessment on the overall schedule of the project and will inform the market as and when appropriate. The group believes that the total project cost remains on budget at approximately HK$36 billion.”

SJM’s gaming revenue in 3Q17 saw a slight 0.6% rise to HK$10.012 billion, but Adjusted EBITDA declined 10.4% to HK$726 million while revenue for the first nine months of the year combined was down 1.2% on 2016 numbers to HK$30.39 billion.

Profit attributable to owners of the company in 3Q17 was HK$428 million, down 16.5% year-on-year.

Brokerage Sanford C Bernstein described the results as below estimates with “both Mass and VIP disappointing relative to overall market growth in Q3 – share loss is evident in both segments.”

Gaming revenue at SJM’s flagship Grand Lisboa was HK$3.71 billion, an increase of 19.3% from the same period in 2016, with its Adjusted EBITDA up 2% to HK$418 million.

By segment, VIP gaming revenue grew 7.4% to HK$4.79 billion, while mass market revenue declined 4.6% to HK$5.05 and slot machine fell 7.7% to HK$251 million.

The group said it operated an average of 290 VIP gaming tables throughout the quarter – fewer than the 323 it ran in 3Q16 – as well as 1,368 mass market gaming tables and 2,632 slot machines.

SJM’s CEO, Dr Ambrose So, said he remained confident in the company’s long-term prospects with completion of Grand Lisboa Palace the primary focus.

“In spite of Typhoon Hato and other events that affected our Grand Lisboa Palace project in the third quarter of 2017, the effects of which are still being assessed, we are working full speed on construction of the project in Cotai with full confidence in the future of our business and Macau,” he said.

However, Union Gaming's Head of Asia Equity Research, Grant Govertsen, warned, “SJM's lack of a presence on Cotai makes for a very challenging operating environment. We expect the company to be a share donator for the foreseeable future and largely unable to participate in the ongoing market recovery.”



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