Management of Macau concessionaire SJM Resorts told analysts on Wednesday that the company’s HK$39 billion Cotai integrated resort, Grand Lisboa Palace (GLP), continues to book EBITDA losses on limited capacity, but the company hopes it will reach break-even by the end of the year.
Details of SJM’s recovery trajectory were outlined during an earnings call Wednesday after parent SJM Holdings published the group’s financial results for FY22. This included confirmation that mass drop had reached 80% of pre-COVID levels during Chinese New Year and 70% in the month or so since, while slots are already performing above pre-COVID levels.
However, GLP, which held a soft opening in mid-2021, continues to notch EBITDA losses given only one-third of the property is currently operational.
As a result, GLP currently holds around 1% market share although management expects this to triple as the property opens more facilities.
Among SJM’s phased opening plan for GLP, the West Tower will open this month followed by the remaining 199 rooms at Karl Lagerfeld hotel as staffing levels allow. An additional 50 gaming tables will also be added this month with SJM flagging a Grand Opening of the resort towards the end of the year.
At present, GLP is generating revenues of around HK$4 million per day and will break even when revenue hits around HK$10 million per day, predicted to occur sometime in the second half of 2023, the company said. Group-wide EBITDA has already reached break even, it added.
In a note, Credit Suisse analysts Kenneth Fong and Sardonna Fong said, “Rather than [SJM’s FY22] result, we believe investor focus would be the outlook for Macau recovery.
“Management gave a constructive outlook on the recovery momentum. We expect positive news flow and strong sequential improvement in gaming revenue to lift sentiment and support share price performance.
“Looking into the next few months, as package tours resume and tourism sentiment normalizes in China, we expect gaming revenue to continue to see improvement.”
