Seaport Research has highlighted that, while SJM’s Grand Lisboa Palace (GLP) continues to ramp up operations, its return on investment remains disappointingly low and is unlikely to generate any positive value relative to the cost of investment in the near future, if at all.
This assessment follows the release of SJM’s 4Q24 results. Vitaly Umansky, senior analyst at Seaport, noted that the ramp-up at GLP is a critical driver for the stock to show positive momentum. Meanwhile, SJM’s strategy for GLP is still evolving. The company has been strengthening its sales and marketing team in recent quarters, which has led to increased costs.
It is worth noting that GLP’s operating expenses rose by 2 percent quarter-on-quarter in 4Q24. The company introduced an expanded premium play program (VIP and Premium Mass) at both Grand Lisboa and GLP in 3Q24, and Umansky expects the development of marketing and service capabilities for the premium mass segment to take additional time.
Market share
SJM reported a net profit of $101 million in 4Q24, marking its first profit since 4Q19. However, its market share for the quarter declined slightly to 13.5 percent from 13.9 percent in 3Q24, with the share of operated casinos (excluding satellites) decreasing from 8.8 percent in 3Q24 to 8.6 percent.
Seaport estimates that SJM lost market share in January but likely regained some ground in February. However, the firm does not foresee significant market share growth for SJM in the near term.
On the lower end of the market, SJM appears to be gaining some share, particularly among day-trippers, as other operators have focused more heavily on premium play. This may provide short-term benefits for SJM, but Seaport anticipates that other operators will increasingly target the base mass segment in the upcoming quarters.
Dividends not expected to resume until at least 2026
Seaport does not expect dividends to resume until at least 2026, citing that SJM is continuing to reduce debt through free cash flow.
Meanwhile, the company’s operating expenses (OPEX) rose by approximately 7 percent quarter-on-quarter, slightly lower than the 9 percent increase in the previous quarter. OPEX is expected to continue rising over the next few quarters, especially at GLP. However, excess costs at the satellite business are gradually decreasing, and EBITDA profitability in the satellite business should improve, although satellites contributed less than 4 percent of the company’s EBITDA in 4Q24.
Seaports also mentioned that the future of SJM’s satellite operations beyond 2025 remains uncertain due to the current gaming law, with no clarity from either the government or SJM regarding the outcome.
