Morningstar | Pansy's Alliance with the Fok Family May Lead to Change in Leadership in SJM
As one of six casino licence holders in Macau, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. The additional supply by major casino operators in the next few years will increase higher-spending overnight visitors and revitalized appeal for Macau. With the completion of the Hong Kong-Zhuhai-Macau bridge and light railway transit in 2018, Macau's carrying capacity for tourists will increase. In addition, the neighboring Hengqin Island, 3 times the size of Macau, is under rapid development to complement Macau's growth.SJM has lost Macau total revenue market share, going from 24% in the first quarter of 2015 to 15% in the third quarter of 2018. We expect market share losses to continue until the opening of SJM's new casino complex in Cotai, Lisboa Palace, in 2020. Currently, SJM's casinos and satellite casinos are all located in the Macau Peninsula. Given our table grant forecast of 125 and the relocation of 192 tables to Lisboa Palace, we expect Lisboa Palace to regain competitiveness and market share and increase margins for the group. However, in the long term, we still assume SJM will lose market share to peers given its weaker track record in the past. The new resort includes three hotels with 2,000 rooms, more than 4 times the current room count at Grand Lisboa, giving SJM more complimentary rooms for premium mass customers, who are 4 times more profitable. Lisboa Palace and the group's current casinos in the Peninsula are expected to target different markets; the former will target families who enjoy entertainment amenities and are more likely to stay overnight, while its casinos in the Peninsula will target day-trippers and hardcore gamblers.SJM Holdings is an investment holding company based in Hong Kong. Co. is the holding company of Sociedade de Jogos de Macau and is engaged in the development and operation of casinos and related facilities in Macau Special Administrative Region, the People's Republic of China. Co.'s casinos are located in prime locations on the Macau Peninsula and Taipa Island. Gaming operations are comprised of VIP table gaming, Mass Market table gaming and slot machines. Co. is organized in two segments: Gaming Operations (operation of casinos and related facilities); and Hotel and Catering operations (hotel, catering and related services).
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