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SJM still aiming to complete Cotai construction in 2018 as Macau market share falls further

Thursday, 01 March 2018 05:04
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Sociedade de Jogos de Macau, S.A. (SJM) saw its Macau market share contract to 16.1% in 4Q17, including just 13.6% of VIP share, as it races to complete construction of its Cotai integrated resort Grand Lisboa Palace.

Announcing its fourth quarter and Full Year 2017 financial results on Wednesday, SJM revealed a slight 0.1% increase in gross gaming revenue for the 12 months to 31 December to HK$41.29 billion. Adjusted EBITDA decreased 10% to HK$3.07 billion and profit fell 15.6% to HK$1.96 billion.

Most telling though was the loss in market share, down 3% from 19.1% in 2016. VIP market share declined from 17.3% last year to 13.6%, with mass market share down slightly to 20.8%.

Regaining lost market share will be largely reliant on the opening of Grand Lisboa Palace, with SJM now the only one of Macau’s six concessionaires yet to boast a presence in Cotai following the launch of MGM Cotai last month. Nevertheless, CEO Dr Ambrose So said that the company was still aiming to finish construction of its HK$36 billion project before the end of the year.

“Macau saw the beginning of a turnaround in its casino gaming market in 2017 and SJM has entered 2018 in a strong position,” he said.

“In spite of challenges that arose during the past year, we achieved substantial progress on construction of our Grand Lisboa Palace and we are still striving for construction to finish by the end of this year.

“In 2017 we also opened our Jai Alai Hotel, completing our entertainment complex at Oceanus at Jai Alai. We continue to be optimistic about the future of Macau and of SJM as a major contributor to Macau’s tourism industry.” 

The actual opening of Grand Lisboa Palace isn’t expected until late 2019 or early 2020, according to analysts.

GGR at flagship property Grand Lisboa grew 5.8% in 2017 to HK$14.9 billion, with profit declining 1.4% to HK$1.4 billion and Adjusted EBITDA down 5.1% to HK$1.7 billion.

The results included an 11% year-on-year and 2% sequential decline in Adjusted EBITA in 4Q17, which saw Full Year 2017 Adjusted company EBITDA fall 4% to HK$744 million.

Discussing the results and ongoing work on Grand Lisboa Palace, Morgan Stanley noted that, “Capex for Cotai remains at HK$36 billion despite the construction accident in June, typhoon in August and fire in September last year.

“SJM spent HK$16 billion up to December 2017 and holds up to HK$20 billion in capex for the remainder. The construction is targeted to be completed by end-2018. We expect that the new Cotai property will not open until end-2019 or 2020 due to the license application.”

In its earnings call, SJM said it anticipates having its license, which expires in 2020, initially extended for two years through to 2022 before expiring although it added there could be some level of cost associated with securing the extension.

SJM declared a final dividend of HK$0.15 per share for 2017.



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