Bloomberg News

SJM in Advanced Talks for New Casino as 2011 Profit Climbs 49%

February 29, 2012

SJM Holdings Ltd. (880), Asia’s biggest casino company, said it’s in advanced talks with the Macau government to build a new casino after 2011 profit rose 49 percent.

Net income climbed to HK$5.31 billion ($685 million), as tourists from mainland China stoked gambling revenue in Macau, the company said in a statement to Hong Kong’s stock exchange today. That matched the HK$5.31 billion average of nine analyst estimates compiled by Bloomberg.

The company joins Sands China Ltd. (1928), MGM China Holdings Ltd. (2282) and Melco Crown Entertainment Ltd. (6883) in reporting income gains fueled by rising tourism to the former Portuguese colony, the world’s biggest gambling hub and the only place in China where it’s legal. SJM, founded by billionaire Stanley Ho, has lost market share as rivals open new luxury resorts in Macau, where casino revenue jumped 35 percent to 25 billion patacas ($3.1 billion) in January and has tripled in the past four years.

“My concern remains with the falling market share,” Kenny Tang, Hong Kong-based general manager of AMTD Financial Planning Ltd., said today. SJM “is still in talks and there’s no concrete plan. It will take several years before it can build a new casino.”

SJM will pay a final dividend of 43 Hong Kong cents a share and a special dividend of 22 cents, compared with a final dividend of 30 cents paid in 2011, the casino operator said.

Earnings per share rose to 95.4 cents from 66.2 cents a year earlier, while gaming revenue gained 32 percent to HK$76 billion, the company said.

Falling Market Share

SJM, with casinos including Grand Lisboa and Ponte 16 on Macau Peninsula, had a market share of 29 percent in the Macau gambling market in 2011, it said today. It was down from 31.3 percent in 2010. Its market share may fall to 26.5 percent this year, said Richard Huang, a Hong Kong-based analyst at CLSA Asia-Pacific Markets.

Las Vegas Sands Corp. (LVS) and Galaxy Entertainment Group Ltd. (27) benefit from the increasing popularity of the city’s Cotai strip, where they have integrated resorts. Galaxy opened a new casino in Macau last year and Sands will have one opening this year which gives them greater growth potential than SJM, Tang said.

“Macau is a supply driven market, not demand driven,” he said. “If you have new projects that will boost demand.”

SJM has applied to develop a 70,468-square-meter integrated resort in Cotai which will include mass market and VIP gaming, lodging, dining and entertainment. The project, which will take several years to develop, is subject to government approvals, the company said today.

New Casinos

Las Vegas Sands, through Hong Kong-listed unit Sands China, is developing casino resorts in Macau to add to its existing properties, the Venetian, Four Seasons and Sands.

The first phase of Sands Cotai Central, featuring three hotels and two casinos, is on track to open in about eight weeks, the company said on Feb. 2.

Galaxy opened Galaxy Macau resort last May which helped almost triple its profit in the third quarter ended September. It lifted the company’s market share to about 17 percent, Chairman Lui Che-woo said in June. Huang from CLSA expects its market share to increase to 18 percent this year.

SJM’s VIP gambling revenue climbed 36 percent to HK$52.8 billion during the year. Revenue at Casino Grand Lisboa increased 46 percent and profit gained 41 percent, according to the statement.

SJM rose 1.8 percent to HK$16.24 at the close in Hong Kong trading before the earnings announcement. The stock climbed 28 percent this year, compared with a 17.6 percent gain on Hong Kong’s benchmark Hang Seng Index.

To contact the reporter on this story: Stephanie Wong in Shanghai at swong139@bloomberg.net

To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net; Bret Okeson at bokeson@bloomberg.net


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