It seems a cap on VIP agent commissions can’t come soon enough for Dr Stanley Ho’s casino operating company SJM Holdings.
The company revealed in its first half results on Tuesday that marketing and promotion costs had risen to 38.7 percent of its total gaming revenue—a three percent increase year-on-year, and a 2.6 percent increase compared to the second half of 2008.
At the same time, in order to encourage big volume players to keep rolling, SJM also issued more credit to agents. As a result receivables—money owed to SJM by junkets—rose 55.3 percent year on year from HKD612.3 million (USD79 million) in H1 ’08 to HKD951.5 million in H1 ’09.
The extra expenses, combined with recession in the feeder markets, helped to produce a 40.8 percent fall year-on-year in SJM’s first half profit, to HKD338 million (USD43.6 million) from HKD571 million a year earlier.
This was despite an aggressive cost savings drive that included a 5.6 percent cut in SJM’s workforce in the first six months of 2009.
SJM’s gaming revenue in H1 ’09 was HKD14.79 billion, down 4.3 percent year-on-year but up 17.9 percent from H2 ’08.
The prognosis for SJM in the Macau market still looks positive, however. The money the company spent on wooing agents did get results. SJM’s total Macau market share rising to 29.6 percent of gross gaming revenue, a year-on-year increase of 2.5 percent.
At the same time as building share in the existing market, SJM is busy extending its market coverage, with the opening of a new casino, L’Arc, next week. At some stage within the next year, Oceanus, a property next door to Macau’s main ferry terminal on Macau peninsula, is also due to open. The widely reported opening date of late 2009 now looks wildly optimistic. A call by Asian Gaming Intelligence last week to a well-placed source in SJM regarding Oceanus shed no new light on the opening date.
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