Bloomberg News

SJM in Advanced Talks for New Casino as Market Share Slips

March 01, 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 as it faces market share declines in the world’s largest gambling hub.

SJM, facing rising competition in Macau, yesterday said its share of the Macau gambling market fell to 29 percent in 2011 from 31.3 percent a year earlier. Net income for 2011 climbed 49 percent as tourists from mainland China stoked gambling revenue, the company said in a statement to Hong Kong’s stock exchange.

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. The company and rivals Sands China Ltd. (1928), MGM China Holdings Ltd. (2282) and Melco Crown Entertainment Ltd. (6883) have benefited from a rise in tourism to the former Portuguese colony.

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

Shares Decline

SJM fell 2.2 percent today at the close in Hong Kong trading. The stock has climbed 25 percent this year, compared with a 16 percent gain in Hong Kong’s benchmark Hang Seng Index.

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.

New Casinos

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 yesterday.

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.

“With Sands Cotai Central set to open in March, we expect SJM market share to further decline,” Richard Huang, a Hong Kong-based analyst at CLSA Asia-Pacific Markets, wrote in a note to clients today. SJM’s market share may fall to 26 percent in 2012-12, he said.

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.

Special Dividend

SJM, with casinos including Grand Lisboa and Ponte 16, 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.

SJM’s net income climbed to HK$5.31 billion ($685 million), matching the HK$5.31 billion average of nine analyst estimates compiled by Bloomberg.

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 yesterday’s statement.

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

To contact the editor responsible for this story: Bret Okeson at bokeson@bloomberg.net


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