Company Reports

As one of six casino license holders in Macao, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. New hotel rooms by major casino operators in recent years have helped to increase higher-spending overnight visitors and revitalized the appeal of Macao. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.

SJM's second-quarter performance weakened sequentially as costs rose. Gross gaming revenue fell 3% quarter-on-quarter, while adjusted EBITDA plunged 15%, squeezing the adjusted EBITDA margin by 1.8 percentage points to 13.8%.

SJM's first-quarter results were constrained by satellite casino closures. Gross gaming revenue fell 8% quarter on quarter, while adjusted EBITDA surged 37%, lifting adjusted EBITDA margin by 5.2 percentage points to 15.5%.

As one of six casino license holders in Macao, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. New hotel rooms by major casino operators in recent years have helped to increase higher-spending overnight visitors and revitalized the appeal of Macao. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.

SJM's fourth-quarter results continued to be dragged by the phased closure of satellite casinos. Gross gaming revenue declined 7% quarter on quarter, while adjusted EBITDA fell by a steeper 24%, narrowing the adjusted EBITDA margin by 2.2 percentage points to 10.3%.

As one of six casino license holders in Macao, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. New hotel rooms by major casino operators in recent years have helped to increase higher-spending overnight visitors and revitalized the appeal of Macao. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.

As one of six casino license holders in Macao, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. The additional supply by major casino operators in the next few years will increase higher-spending overnight visitors and revitalized appeal for Macao. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.

SJM's third-quarter results were affected by the phased closure of satellite casinos. Gross gaming revenue fell 2% quarter on quarter, while adjusted EBITDA grew 28%, driven by better cost control and a higher win rate versus the prior quarter.

Macao welcomed 1.06 million tourists during the first seven days of the 2025 national holiday, according to the Macao Government Tourism Office. This implies a daily average of 150,773 visitors, up 7.4% from a year ago.

SJM's share price plummeted 13% following the release of lackluster second-quarter results. Gross gaming revenue, or GGR, fell 4% quarter on quarter, trailing the industry's 6% growth. Adjusted EBITDA dropped 28%, in stark contrast to the 5% average increase reported by peers.

As one of six casino license holders in Macao, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. The additional supply by major casino operators in the next few years will increase higher-spending overnight visitors and revitalized appeal for Macao. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.

The share prices of Macao casinos surged 5%-11% after the release of June gross gaming revenue on July 1, which rose sharply by 19% from a year ago to MOP 21 billion, reaching 88.5% of the 2019 level—the highest since China lifted travel restrictions in January 2023.

Macao's 11 satellite casinos will cease operations by Dec. 31, 2025. SJM plans to acquire and convert two of its nine satellite casinos, L'Arc Macau and Casino Ponte 16, into self-promoted casinos, while the remaining seven, along with one each from Galaxy and Melco Resorts, will be closed.

SJM's first-quarter gross gaming revenue, or GGR, rose by 0.2% quarter on quarter, maintaining a stable 13.5% market share despite the ongoing ramp-up of Grand Lisboa Palace, or GLP. Adjusted EBITDA fell by 3.5% from a quarter ago to HKD 958 million.

As one of six casino license holders in Macao, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. The additional supply by major casino operators in the next few years will increase higher-spending overnight visitors and revitalized appeal for Macao. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.

As one of six casino license holders in Macao, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. The additional supply by major casino operators in the next few years will increase higher-spending overnight visitors and revitalized appeal for Macao. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei to Hengqin extension rail, Macao's carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao's growth.

SJM's fourth-quarter gross gaming revenue, or GGR, rose 0.5% year over year to HKD 7.5 billion, while adjusted EBITDA fell 4.2% from a year ago to HKD 993 million. The firm returned to profitability for the first time in four years in 2024, posting a full-year net profit of HKD 3.2 million.

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.

Narrow-moat SJM's second-quarter performance was largely in line with our and the market's expectations, with market share in gross gaming revenue edging up to 12.6% from 12.4% a quarter ago. Management indicated a further uptick of its GGR market share to 13.5% in July. We believe this encouraging uptick is mainly driven by a robust performance at the firm's Peninsula asset, the flagship Grand Lisboa, while the share of its new Cotai property, the Grand Lisboa Palace rose moderately to 2.5% in July from 2.2% in the second quarter, trailing its midterm target of 5% by 2026. We slightly raise our 2024 revenue forecast by 4% to HKD 28.3 billion to reflect a stronger-than-expected sales growth outlook at GL into the second half, offset by a higher operating expense assumption amid intense competition. Our long-term forecasts remain unchanged, and we maintain our fair value estimate at HKD 4.68 per share.

We maintain our earnings forecasts and fair value estimate of narrow-moat SJM at HKD 4.68 per share, following the firm’s solid first-quarter performance that reflects a gradual catchup of its new property Grand Lisboa Palace, or GLP, in profitability and market share in gross gaming revenue, or GGR. Its new business initiatives in setting up a centralized platform to increase the connectivity between its properties, and expanding the marketing team are bearing fruit, which helped to drive the group’s first-quarter mass segment GGR to 134% of its 2019 level and 162% in May Golden Week holiday, compared with the 115% in the December quarter. We expect these initiatives, along with additional product offerings—including more food and beverage venues, ramp-up of shopping malls, as well as construction of Grand Hall for concerts and other nongaming events, to further improve the firm’s operating efficiency and accelerate sales growth at GLP in the coming quarters.