SJM, Sands to gain share via fresh Cotai offer: analysis


SJM, Sands to gain share via fresh Cotai offer: analysis

Two Macau casino operators are likely to see a lift to respective pre-tax earnings relative to their local-market peers, due to the duo opening soon fresh tourism facilities on Cotai, suggests a Monday paper from Singapore-based Smartkarma Innovations Pte Ltd. The latter is described as an “independent investment research network”.

The main winner among the two benefitting Macau casino firms was likely to be SJM Holdings Ltd, via its HKD39-billion (US$5-billion) Grand Lisboa Palace project (pictured) on Cotai. There would be some lift also for Sands China Ltd, via a rebranding and upgrade of its Sands Cotai Central resort as the Londoner Macao, said the memo from Michael Ting, a former director at Malaysia-based banking group CIMB.

Mr Ting however cautioned that new capacity entering into the Macau market would “not likely grow overall demand” in the short run “but instead result in winners and losers”. He added that the main beneficiaries in a relative sense would be “those operators with new capacity as players will often gravitate to the newer properties”.

“We expect that when Grand Lisboa Palace opens, coupled with a slow recovery in sector gaming revenues from the pandemic, the immediate impact will be [market] over-capacity, leading to market-share shifts among operators with SJM [Holdings] being the primary beneficiary,” Mr Ting added.

Grand Lisboa Palace is SJM Holdings’ first venture into the Cotai market, an area of Macau focused on large-scale gaming resorts.

SJM Holdings said in its interim results filed in Hong Kong in July that “subject to obtaining the necessary operating permits,” Grand Lisboa Palace was “expected to open by the end of 2020”.

Last week in a press release about a recruitment drive for the property, the firm reiterated the hotel portion of the new complex would have 1,900 rooms and suites.

“We forecast Grand Lisboa Palace to only start with 150 to 250 gaming tables, which may be increased over time,” said Mr Ting. “We expect Grand Lisboa Palace to be geared towards high-end players as two of the hotels… will be Palazzo Versace and Karl Lagerfeld.”

He added: “We estimate that at full ramp, Grand Lisboa Palace can generate circa HKD4.6 billion of adjusted EBITDA [earnings before interest, taxation, depreciation and taxation] which is double the full-year 2019 adjusted EBITDA of Grand Lisboa.”

Grand Lisboa, in the Macau peninsula, is SJM Holdings’ current flagship property.

Mr Ting noted that Sands China – the Macau operating unit of Las Vegas Sands Corp – would “open the Londoner [Macao] property in phases from financial year 2020 to financial year 2021 with an additional 290 new suites at Four Seasons, 600 suites at the Londoner Hotel and 390 new suites at Londoner Court”.

The latter was a reference to hotel space rebranded in line with the new theme of the Londoner Macao.

“We expect the EBITDA contribution to Sands China from these upgrades will not be as significant as that of Grand Lisboa Palace to SJM,” wrote Mr Ting.

“The primary reason is because the new Sands [Macao] capacity will only be a rebranding and refurbishment of current properties and not a new standalone integrated resort,” he added.


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