Macau concessionaire SJM Holdings released its 1Q24 financial results on Thursday, with revenue and EBITDA improvements largely in line with expectations.
But one lingering concern remains the slow ramp of the company’s US$5 billion Cotai integrated resort Grand Lisboa Palace (GLP), with analysts becoming increasingly hesitant in touting its short-term growth prospects – particularly in regard to market share.
In a Friday note, investment bank JP Morgan said it is “not (yet) convinced that GLP can garner its target share of 5% in the coming years,” and has revised its earnings estimates accordingly.
Likewise, Vitaly Umansky of research house Seaport described the ramp-up of GLP as “tepid” at 2.0% market share in Q1, and noting that had it not been for high hold in VIP, share would likely have been 1.9%. He did, however, note comments from SJM management that market share may have approached 2.2% in April.
“We expect the ramp up at GLP to remain slow and the long-term ROI on the GLP investment is likely to be suboptimal,” Umansky wrote. “We remain concerned about Grand Lisboa Palace’s slow pace of ramp-up in what has been a strong Macau recovery.”
Among the issues highlighted by SJM management during their analyst call was a smaller than required sales force in its premium mass segment, with only 113 sales staff onboard. The company is hoping to get to 200 sales staff, Umansky observed, but faces a “very competitive market for such positions.”
“We expect the build out of marketing and service capability for premium mass to take some time,” he said.
“We would expect costs and player reinvestment to rise materially at GLP with the company’s attempt to build out its premium mass capabilities.”
With SJM’s satellite business still unprofitable on the excess carrying costs from shuttered casinos alongside capex requirements and high leverage, SJM has also confirmed that dividends won’t resume until after 2025.
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