CBRE: Macau satellite closures could provide unlikely boost to SJM’s Grand Lisboa Palace

Any closure of Macau’s satellite casinos at the end of this year could provide a boost to SJM Resorts’ Cotai property Grand Lisboa Palace (GLP) by providing an opportunity to relocate gaming tables, according to CBRE Equity Research.

There are currently 11 satellite casinos still operating in Macau of which nine are under the gaming concession of SJM. It remains unclear whether all or some will continue beyond 2025 given changes to the city’s gaming law which will from next year prevent satellite operators from engaging in revenue share agreements – replaced only by payment of a straight management fee.

In a note following release this week of SJM’s FY24 financial results, CBRE’s John DeCree said it remains unclear what the economics of the new operating and management structure could look like, and even if the satellite casinos will continue to be financially viable going forward.

However, while closures would create a headache for SJM in terms of staff redeployment, it could also create an opportunity for GLP given its slow ramp since opening in 2021.

“Any closures could open the door for SJM to reallocate some of that table capacity (and potentially customers) to GLP,” DeCree said.

“If GLP is successful in drawing more foot traffic, the incremental table capacity could help grow its mass market business.”

GLP captured 2.7% of Macau’s GGR market share in 4Q24, up 10 basis points quarter-on-quarter although still well below SJM’s target share for the property of 5%.

Seaport Research Partners analyst Vitaly Umansky remains critical of GLP’s performance, stating in a note of his own that ramp and ROI remains “abysmally low and unlikely to achieve anything approaching positive value creation vs cost of investment in the foreseeable future, if at all.

“The strategy around GLP is still being worked on,” he said, “with the company hiring additional sales and marketing staff over the last few quarters. This has resulted in cost escalations as expected, although GLP quarter-on-quarter opex rose 2% in Q4.

“Q3 had implemented an expanded premium play program (VIP and Premium Mass) at both GL and GLP. We expect the build out of marketing and service capability for premium mass to continue to take time.”