SJM Earnings: Market Share Up With Turnaround of Bottom Line

Narrow-moat SJM returned to the black for the first time in three years in its third quarter, with net profit of HKD 101 million, a solid market share gain in gross gaming revenue to 13.9% from 12.6% a quarter ago, and a 19% sequential rise in adjusted EBITDA to HKD 1,037 million. The results were slightly higher than our and market expectations, owing to a better-than-expected VIP win rate, while operating performance was largely in line. We maintain our fair value estimate at HKD 4.68 per share. We lift our 2024 revenue and adjusted EBITDA forecasts by 3% and 5%, respectively, to incorporate the better-than-expected third-quarter results, but our long-term forecasts are unchanged. We think the shares are undervalued currently as SJM is making steady progress to improve its profitability and shareholder value.