GGRAsia – SJM flags upped Grand Lisboa Palace cost, 1H profit rises

SJM flags upped Grand Lisboa Palace cost, 1H profit rises

Jul 30, 2019 Newsdesk Latest News, Macau, Top of the deck

Macau casino operator SJM Holdings Ltd mentioned in its first-half results a “total project cost” for Grand Lisboa Palace (pictured) of HKD39 billion (nearly US$5 billion) – or 8.3 percent higher than a HKD36-billion figure it had previously associated with the project.

“This estimate of total project cost represents an approximate 8-percent increase from our earlier estimate, originally made in 2016, and incorporates increased costs related to the project’s revised completion date,” said the company on Tuesday.

First-half profit for the Hong Kong-listed company rose 12.1 percent year-on-year on total group-wide revenue and gaming revenue that actually fell slightly.

Interim profit was just under HKD1.68 billion, compared to nearly HKD1.50 billion in the prior-year period.

The group booked HKD2.96-billion in “right of use assets” on its first-half balance sheet – most of it relating to “up-front payments for land use rights in the Macau SAR”. The reason it was booked as income for the first half this year, was due to a permitted reclassification from “land use rights” with effect from January 1, explained the firm.

Group net gaming revenue for the period fell 0.7 percent, to HKD16.72 billion, announced the company in its unaudited interim results.

The company said it paid HKD3.71 billion in gaming commissions and incentives, a fugure 28.4-percent lower than in the prior-year period.

The firm noted in its Tuesday filing that it was “striving” for construction of its new Cotai casino resort – seen by analysts as an urgently needed support for group earnings – “to complete by the end of 2019 and to seek the relevant licences to begin operation as soon as possible thereafter”.

It had been reported last week the group was seeking permission from lenders to push back the permissible completion date on Grand Lisboa Palace to March 2020, and the permissible opening date to year-end 2020.

In its Tuesday announcement SJM Holdings mentioned the resort’s opening was “expected in 2020”.

First-half group adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) – after adjustment for non-controlling interests – rose 6.1 percent year-on-year, to nearly HKD2.08 billion.

Earnings per share – basic and diluted – rose 11.7 percent in each case, to HKD0.296 in each instance.

Ambrose So Shu Fai, vice-chairman and chief executive of SJM Holdings, said in a press release issued after the results filing: “We are pleased that our results for the first half of the year showed decent increases in adjusted EBITDA and net profit, while construction of our Grand Lisboa Palace project nears completion.”

He added: “Our board has voted to declare an interim dividend of HKD0.08 per share.”

In Tuesday’s results, SJM Holdings reported that the firm’s gross gaming revenue (GGR) from VIP gaming operations slipped 25.1 percent in the first half, to HKD7.45 billion, from nearly HKD9.96 billion. That from mass-market table gaming operations rose 8 percent, to HKD12.40 billion, from approximately HKD11.49 billion.

Slot machine and other gaming operation revenue fell 1.2 percent, to HKD575.0 million, from HKD582.0 million.

For the period, the group’s Macau licence-holding unit Sociedade de Jogos de Macau SA had a 14.1 percent share of Macau’s gaming revenue. The group as a whole had a 15.1 percent market share for the same period last year, Tuesday’s filing added.

For the first six months of 2019, the unit had 18.2 percent of mass-market table gross gaming revenue and 10.7 percent of VIP gross gaming revenue.

Brokerage Sanford C. Bernstein Ltd had noted in a May memo that “over the past five years, SJM’s market share has fallen from over 23 percent to an historic low of 14 percent”.

The group’s flagship Casino Grand Lisboa saw a 13.7 percent decrease in GGR in the first half this year, to just under HKD6.86 billion. Adjusted Grand Lisboa EBITDA and attributable profit nonetheless increased by 8.5 percent and 7.8 percent, respectively, as compared with the year-earlier period.