GGRAsia – Complex SJM succession marks missed chances: analysts

Complex SJM succession marks missed chances: analysts

Apr 13, 2018 Newsdesk Latest News, Top of the deck

There a more “questions than answers” following the board reshuffle at Macau casino operator SJM Holdings Ltd on the official retirement of its chairman Stanley Ho Hung Sun, and an opportunity has also been missed to inject fresh blood into the operational team.

That was the assessment respectively of several Hong Kong-based brokerages in notes issued on Friday, following the announcement to the city’s bourse that Daisy Ho Chiu Fung, a daughter of Mr Ho – the latter now 96 and in poor health since 2009 – was to take over in June as chairman of SJM Holdings.

In the company filing, Angela Leong On Kei, fourth consort of Mr Ho, was nominated as a co-chairman of the company along with fellow board member Timothy Fok Tsun Ting, while the chief executive, Ambrose So Shu Fai, is to become vice chairman.

“Stanley Ho is retiring, but leaving more questions than answers behind,” said a memo from analyst DS Kim at JP Morgan Securities (Asia Pacific) Ltd.

“We would have hoped to see a clearer succession plan (a single chairperson would have been a good start), which in turn would enable the company to fine-tune the management team and structure before the opening of Grand Lisboa Palace next year (likely in the second half, 2019),” wrote Mr Kim, referring to the casino company’s HKD36-billion (US$4.6 billion) under-construction Cotai resort.

He added: “This complicated structure, in our view, leaves room for a potential power tussle within the board, given the lack of clear control (at least it seems so to us).”

In March 2011, it was widely reported that Mr Ho and family members had settled a highly-publicised two-month dispute over control of his interests.

Brokerage Sanford C. Bernstein Ltd said in a Friday note: “Instead of using Stanley Ho’s retirement as an impetus to make governance and management changes, the company has opted to further entrench the status quo.”

Analysts Vitaly Umansky, Zhen Gong and Cathy Huang added: “A hydra-like three-headed co-chairman group and the elevation of entrenched management is not an indication that any shake up at the company is forthcoming (as some bulls of the stock have hoped).”

The brokerage added, referring to SJM Holdings’ Macau market rival Galaxy Entertainment Group Ltd: “Galaxy’s hiring of Ted Chan (former chief operating officer of Melco [Resorts]) removes a key potential executive hire that had been the subject of market talk.”

Sanford Bernstein further stated: “If Chan had been hired and empowered by SJM, he could have been a key driver in transforming the company. Instead his talents will now benefit Galaxy.”

In commentary on Monday, Deutsche Bank AG and Union Gaming Securities Asia Ltd said they were scaling down the likely positive contribution to SJM Holding’s 2019 earnings from Grand Lisboa Palace.

Sanford Bernstein said in a February note that it expected Grand Lisboa Palace to open in “late 2019 or even early 2020”.

In its Thursday commentary, the institution noted, citing information mentioned by Bloomberg: “The company effectively admitted that Grand Lisboa Palace will not open until very late 2019 as it is seeking consent from lenders on waivers and amendments to its credit facility.”

Sanford Bernstein added: “Amendments being sought on the credit facility (including a delayed construction completion date, delayed opening date, and loosening of credit covenants (to six times leverage in 2019, five times in 2020 and four times beyond) now confirm the project will be delayed as we had earlier argued.”