Inside Asian Gaming

INSIDE ASIAN GAMING | September 2011 30 Asian Gaming 50 – 2011 14 (-) Ambrose So Executive Director and CEO SJMHoldings To find Dr Ambrose Shu Fai So, you need only look in the right places.Thoseplaces arewherever SJMneeds tobe inorder to cultivate goodwill and show appreciation. It’s payback for the exalted position that STDM and latterly SJM have held and the handsome profits they have made over half a century of business in Macau. The right place could be at a reception for a politician visiting from the Chinese mainland. Or it could be at one of the high-profile sporting events that SJM sponsors, perhaps a charity fund-raiser, or the presentation of the scholarships the company awards every year. And where there’s a right place, there’s also a right sound bite. Some observers regard Dr So’s comments as often bordering on the Delphic—i.e. hinting at something without actually saying it. But it always pays to listen closely. Dr So chooses his words with precision and is probably one of the best-informed gaming executives in Macau—especially now that his boss, Dr Stanley Ho, has retired. When the discussion turns to developments at Ponte 16, Hengqin Island or SJM’s plans for Cotai, and the occasion calls for the right quote, he’s at the ready. He’s the one hosting the SJM quarterly earnings calls with such serene comprehension. His personal passion is Chinese calligraphy, a most civilised and exacting of arts; one that requires infinite patience, a meticulous eye and a steady hand. Dr So is an acknowledged master. It speaks to the true measure of his power, which is that you hardly notice him wielding it. The gambling empire founded by Dr Ho and his original partners ended 2010 with eight consecutive quarters of revenue and EBITDA growth. Through the first half of 2011, SJM’s core properties (Casino Lisboa, Grand Lisboa, Oceanus and Jai Alai) and its 14 satellite casinos together accounted for one-third of Macau’s gross gaming revenues (GGR). SJM has to share the spoils from the satellites with the management of each of the satellite properties as they are SJM- licensed but owned by other parties. Nonetheless, SJM’s grip on the general market and the high growth VIP market still looks powerful. SJM had 38% of mass GGR and 30% of VIP during the relevant period. EBITDA was up 56% to HK$3.49 billion on a 41% increase in win to HK$37.53 billion. The company brought 48 HK cents per share to the bottom line, a 62.5% increase year over year. Its 17 casinos are on track to break HK$70 billion in win during the year. Yet, for all that shareholders are reaping from the CEO’s managerial know-how (Dr So holds a doctorate in the field) and his decades of experience catering to the most voracious gamblers in the world, it’s been his unflappable demeanour, as much as anything, that has added value to SJM’s market position. The sure, subtle brush strokes of calligraphy and diplomacy, the tall, bespectacled presence, part- businessman, part-scholar, that has calmed investors through some very rough seas and kept them on board. Those investors have made their gratitude known. The stock was trading, in the week IAG went to press, at better than 22 times earnings on a trailing 12-month basis and climbing back toward its 52-week high — and this not six months after trading in the shares was suspended in the wake of that nasty public feudwithin theHo clan for control of STDM-SJM. Dr So performed basically the same critical function when during 2007 and the first half of 2008 Dr Ho’s sister Winnie Ho obstructed SJM’s planned initial public offering in Hong Kong. Through months of seemingly interminable court battles, he kept his nose trained on the finish line. When the day finally came in the summer of 2008, a year late and on the brink of a worldwide financial meltdown, it was Dr So standing at Stanley Ho’s right at the Hong Kong Stock Exchange. Earlier this year, once the dust settled for control of the casino empire, Dr So wasn’t hard to pick out. At that point, he was already long gone from Shun Tak Holdings, having resigned in 2009 after 18 years as a director, officially to“devote more time”to [his] own business. His diplomatic as well as business skills have helped to make him at 60 years old a very wealthy man, one of only four executives of SJM Holdings whowere awarded stock (Dr Ho’s fourth consort Angela Leong On-kei, COO Louis Ng and long-time legal advisor Rui Cunha were the others). In the most recent round of option allotments, announced in March, Dr So’s was the largest, at 35 million shares. He chairs the board’s two key committees: Nominations and Remuneration. As for the political game, which is paramount in Chinese affairs, he’s played it with aplomb. He is a member along with Stanley Ho of the prestigious National Committee of the Chinese People’s Consultative Committee. He is a member of the S.A.R.’s Economic Development Council. He is the honorary consul of Portugal in Hong Kong. His cultural, educational, scientific and community activities are too numerous to list. His calligraphy has been featured in a set of stamps issued by Macau Post and has been the subject of solo exhibitions in Macau, Hong Kong, Shanghai and Taiwan. It is part of the collections of the University Museum and Art Gallery of The University of Hong Kong, the Art Museum of Princeton University and the U.S. Library of Congress. This is aman for all seasons, and as Stanley Ho has known through the years, the ablest of seconds. If the smart money is correct and SJM Holdings is now Ms Leong’s to lose, she must know this as well. since last year. Mass-market performance has also improved. In 2Q, casino drop was up 59% at CoD. At Altira it nearly doubled, though admittedly from a low base as Altira was conceived and continues to be marketed as a specialist property for high rollers. Non-gaming revenue at CoD was up 69%—suggesting the resort is succeeding as an all-round tourism destination. Mr Packer’s other gaming investments—Crown, Betfair Australasia, the Cannery Casino Resorts in the United States and the Aspers Group in the UK—can’t compete with Macau’s performance. One question raised by commentators is how dilutive any Hong Kong IPO will be for existing MPEL shareholders. Based on recent prices, the Nasdaq-listed stock has soared in value by more than 200% in the past year. The markets’positive reaction to MPEL’s US$1.2 billion refinancing earlier this year—when 13 banks took part—suggests investors are expecting more upside to come. The bulls should continue to run once earth is moving again on the Studio City site.