The improvement reported in SJM’s third-quarter financial results was driven by robust performance in the VIP segment at Grand Lisboa Palace (GLP) and Grand Lisboa, according to a dispatch by brokerage Seaport.
Analyst Vitaly Umansky noted that the company’s EBITDA was significantly bolstered by high VIP hold rates of 4.7 percent at GLP and 5.2 percent at Grand Lisboa, which helped the company achieve a net profit of HK$101 million ($13.1 million).
This marks SJM’s first profit since Q4 2019, a stark contrast to the HK$88 million ($11.4 million) loss reported in Q2.
SJM’s market share in the Macau SAR increased to 13.9 percent, up from 12.6 percent in Q2, with operated casinos contributing 8.8 percent to this share, also an improvement from 7.8 percent in the prior quarter.
Adjusted for normal hold, the market share from operated casinos would be approximately 8.4 percent, Seaport points out, with SJM’s overall increase in market share primarily driven by satellites and self-owned properties. However, October figures indicate a slight decline, with market share around 13.8 percent.
Despite the positive financial performance, concerns remain regarding the slow ramp-up at Grand Lisboa Palace. Umansky cautioned that while the property is expected to continue its growth trajectory, the return on investment is currently low, raising doubts about achieving significant value creation in the foreseeable future.
SJM is actively refining its strategy for GLP, having recently hired additional sales and marketing staff and implemented an expanded premium play program targeting both VIP and premium mass markets.
Operating expenses at SJM rose by over 9 percent quarter-on-quarter, a trend expected to continue, particularly at GLP. Meanwhile, profitability from the satellite business is gradually improving, though it accounted for less than 4 percent of the company’s EBITDA in 3Q24.
The future of satellite operations beyond 2025 remains uncertain due to current Macau gaming laws, which mandate that satellite venues must transition to a management company within three years, with the deadline set for the end of 2025.
SJM is also focused on debt reduction, with the net debt to EBITDA ratio decreasing to 6.8x from 13.8x earlier this year. The company projects this ratio will further decline to 6.1x by year-end and below 5x by the end of 2025 as it continues to pay down debt and improve free cash flow.
