Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
SJM HOLDINGS
HKEx Stock Code : 00880 
 
Corporate Profile
The principal activity of the Company is investment holding, whilst its operating subsidiary, Sociedade de Jogos de Macau, S.A. (¡§SJM¡¨), conducts casino gaming operations and gaming-related activities in Macau.

Business Review - For the year ended December 31, 2012

Operating Results ¡V VIP Gaming

VIP gaming operations accounted for 67.5% of the Group's total gaming revenue in 2012, as compared with 69.9% for the previous year. As at 31 December 2012, SJM had 587 VIP gaming tables in operation with 36 VIP promoters, as compared with 609 VIP gaming tables and 32 VIP promoters as at 31 December 2011. As at 31 December 2012, SJM operated VIP gaming in 14 of its casinos.

As VIP chips sales for the year decreased by 4.0%, the increase in VIP gaming revenue of 1.0% resulted from a higher hold rate for the year. The hold rate for SJM's VIP operations increased in 2012 to 3.03% from 2.88% in 2011.

Operating Results ¡V Mass Market Table Gaming

Gaming revenue from mass market table gaming operations comprised 30.6% of the Group's total gaming revenue in 2012, as compared with 28.2% in 2011. SJM had 1,184 mass market gaming tables in operation as at 31 December 2012, as compared with 1,166 mass market gaming tables as at 31 December 2011.

Increased mass market table gaming revenue of 13.3% resulted from increased visitation to Macau from the Mainland and the Asian region as well as increased spending per visitor.

Operating Results ¡V Slot Machines and Other Gaming Operations

Gaming revenue from slot machine operations, which include other electronic gaming machines and the game of Tombola, comprised 1.9% of the Group's total gaming revenue in 2012, the same as in 2011. SJM had 3,532 slot machines in service as at 31 December 2012 as compared with 3,910 slot machines as at 31 December 2011.

As at 31 December 2012, SJM operated slot machines in 14 of its casinos and in two slot halls. In January 2011, SJM ceased operations at Tiger Slot Lounge at the Macau Tower, and in November 2012, SJM ceased operations at the Macau Jockey Club Slot Lounge.

Operating Results of Casino Segments ¡V Casino Grand Lisboa

SJM's flagship Casino Grand Lisboa achieved substantial growth in revenue and profitability during the year. Visitation to Grand Lisboa grew during the year, from an average of 34,733 visitors per day in the first quarter, to an average of 40,770 visitors per day in the fourth quarter. Narrowing of the Adjusted Property EBITDA Margin resulted from more rapid growth in VIP gaming revenue as compared to growth in mass market gaming revenue.

During 2012 Casino Grand Lisboa expanded its VIP gaming operations from 134 tables as at 1 January 2012 to 175 tables as at 31 December 2012. Two areas of the property were converted for VIP gaming, on the 31st floor (since February) and on the 9th and 10th floors (since September). Mass market table gaming grew during the year due to increased numbers of visitors and greater spending at gaming tables, particularly by high limit mass market customers.

If calculated under US GAAP, the Adjusted Property EBITDA margin of Casino Grand Lisboa would be approximately 25.8% for 2012, as compared with 27.2% in 2011 (See ¡§Comparison with United States GAAP Accounting¡¨ below).

During 2012, Casino Grand Lisboa attracted a total of over 13.6 million visitors, an average of 37,238 visitors per day, an increase of 11.1% over the previous year. To continue attracting gaming patrons, Casino Grand Lisboa frequently launches special promotions, such as ¡§Treasure Triumph¡¨, ¡§Double Goal¡¨ and ¡§Fortune Multiplier¡¨. Jackpots are paid frequently, with the total exceeding $277 million for slot machines and over $75 million for table games (Caribbean Stud Poker) in 2012. During the year, the number of active members of the Casino Grand Lisboa loyalty card programme increased by over 88,000 to 476,966.

As at 31 December 2012, Casino Grand Lisboa operated a total of 175 VIP gaming tables, 240 mass market gaming tables and 731 slot machines.

Operating Results of Casino Segments ¡V Other Self-promoted Casinos and Slot Halls

Other self-promoted casinos are Casino Lisboa, Casino Oceanus at Jai Alai and Casino Jai Alai, all located on the Macau Peninsula. The latter two casinos operate under the same license. The Group also operates two self-promoted slot halls, namely Treasure Hunt Slot Lounge and Yat Yuen Canidrome Slot Lounge (collectively, ¡§Other Self-promoted Casinos and Slot Halls¡¨).

Operating Results of Casino Segments ¡V Satellite Casinos and Slot Hall

As at 31 December 2012, SJM operated 14 satellite (third party-promoted) casinos, as follows: Casino Babylon, Casino Casa Real, Casino Diamond, Casino Emperor Palace, Casino Fortuna, Casino Golden Dragon, Casino Macau Jockey Club, Casino Greek Mythology, Casino Jimei, Casino Kam Pek Paradise, Casino Lan Kwai Fong, Casino L'Arc Macau, Casino Ponte 16 and Casino Club VIP Legend. A third party-promoted slot hall, Tiger Slot Lounge located at Macau Tower, ceased operations on 19 January 2011.

Twelve of SJM's satellite casinos are located on the Macau Peninsula whilst two satellite casinos are located on the island of Taipa, comprising a total of 625 mass market gaming tables, 363 VIP gaming tables and 1,718 slot machines, as at 31 December 2012.

Non-gaming Operations

For the year ended 31 December 2012, the Grand Lisboa Hotel contributed $660 million in revenue and $205 million in Adjusted Property EBITDA to the Group as compared with $586 million in revenue and $203 million in Adjusted Property EBITDA for the previous year. The occupancy rate of the hotel, based on 412 average available rooms, averaged 95.0% for the full year, as compared with 92.6% for the previous year, and the average room rate for the full year 2012 was approximately $2,129 as compared with $2,055 in 2011.

Food and beverage units at the Grand Lisboa continued to earn international recognition. In the 2012 Michelin Guide Awards, Robuchon au Dome received three stars and our Cantonese restaurant The Eight received two stars, while the Noodles and Congee Corner was awarded a ¡§Bib Gourmand.¡¨ The Miele Guide selected Robuchon au Dome as No. 1 in Asia, and the wine cellars of Robuchon au Dome and Don Alfonso 1890 received the Grand Award from Wine Spectator.

Operating results for the Sofitel at Ponte 16, in which SJM's interest is 51%, improved during 2012 and contributed $184 million in revenue to the Group, compared with a contribution of $162 million in 2011. The occupancy rate of the 408-room hotel averaged 80.8% for the full year 2012 as compared with 72.8% in 2011, and the average room rate increased by 0.7% to $1,210. The Sofitel at Ponte 16 received numerous travel industry awards in 2012 including the Travelers' Choice 2012 Award as one of the ¡§Top 25 Best Hotels in Greater China.¡¨ Income from all hotel, catering and related services, after inter-company elimination, totaled $635 million in 2012, an increase of 9.9% from $578 million in 2011, due primarily to increased hotel room occupancy. Other income, primarily interest earned on bank deposits, finance leases interest received and dividend income from investment in financial assets at fair value, increased to $423 million from $212 million during the year.

Business Outlook - For the year ended December 31, 2012

In pursuit of the Group's strategy of growing its business through expansion of casino and casinorelated operations in Macau and improvement in the operating efficiency of existing business units, the Group has been and is progressing on a number of initiatives in 2012 and 2013, which are described below.

¡E at Cotai

On 19 October 2012, SJM accepted the proposed draft Land Concession Contract in respect of the lease of a site on Cotai with an area of 70,468 square metres. The proposed draft Land Concession Contract permits SJM to develop a complex containing a five-star hotel with total gross floor area of 521,435 square metres and with gaming areas on the site. It also permits SJM, as a gaming concessionaire, to operate and manage gaming operations on the site.

The total contract premium payable to the Macau Government by SJM as determined by the Macau Government and pursuant to the proposed draft Land Concession Contract is MOP2,150,504,955 (equivalent to approximately $2,087,868,888). The initial payment of the contract premium in the amount of MOP800 million (equivalent to approximately $776,699,029) was paid on 19 December 2012.

The acceptance of the proposed draft Land Concession Contract represents a milestone development for the Group as it offers the opportunity for SJM to expand its existing gaming operations from Macau Peninsula to Cotai and to enhance the Group's revenue in the future upon completion of the development. SJM plans to build a casino gaming resort and intends to apply to the Macau Government to operate approximately 700 gaming tables and 1,000 slot machines as well as approximately 2,000 hotel rooms on the site (subject to the obtaining of applicable licences from licensing authorities).

¡E at Casino Grand Lisboa

In 2013 SJM is continuing to expand gaming capacity at Casino Grand Lisboa by making more space available for tables on the ground floor for mass market gaming and on the first floor, adjacent to the current high-limit gaming area, for premium mass market gaming. Further space for expansion of premium mass market table games is under consideration involving relocation of food and beverage outlets. SJM is currently working with contractors to determine the actual added capacity, expenditure requirements and timetable. In the first quarter of 2013 additional VIP gaming tables were added on the third floor and on the 31st floor.

¡E at Casino Lisboa

Casino Lisboa is currently upgrading its table capacity and in 2013 will devote more tables for premium mass market gaming in special high-limit gaming areas. In addition, Casino Lisboa has opened a new area for multi-station electronic games and will add 150 slot machines adjacent to the main gaming areas by the second quarter of 2013.

¡E at Casino Jai Alai

As per announcement made on 18 November 2012, a subsidiary of SJM will lease the entire Jai Alai Palace building, which houses Casino Jai Alai and is adjacent to Casino Oceanus at Jai Alai, for a period of three years beginning 1 January 2014. SJM plans to provide facilities at Jai Alai Palace including hotels, restaurants, department stores and others (to be operated by other service providers) to enhance the business of Casino Jai Alai and Casino Oceanus at Jai Alai. Construction has recently begun on the enclosed bridge connecting the two buildings.

¡E at Ponte 16 Resort

Adjusted Property EBITDA contribution of the resort increased to $332 million in 2012 from $317 million in 2011, and the project contributed positively to the Group's net profit.

In April 2012 a group of banks led by Industrial and Commercial Bank of China (Macau) Limited completed syndication of 5-year loan facilities for Ponte 16 in the amounts of $1,900 million and RMB400 million. The proceeds will be used primarily to refinance existing credit facilities, to repay shareholders' loans and to fund the construction of Phase III development of the Resort. Phase III will be a riverside commercial complex with total floor area of approximately 40,000 square metres. In addition to shopping and dining facilities the complex will encompass space for gaming expansion, car parks and the iconic Pier 16 clock tower, and is planned to be completed by 2014.

Source: SJM Holdings (00880) Annual Results Announcement
Chairman Ho Hung Sun, Stanley Issued Capital (shares) 5,550M
Par Value HKD 1 Market Capitalisation (HKD) 110,560M
 
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