SJM's profit growth slows on VIP pinch
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Macau relies on the big-money VIP market for more than 70 percent of gambling revenue but this segment has been hit particularly hard by China's economic slowdown.
SJM's half-year net profit rose 28 percent, in line with expectations, relying for much of that growth on increasingly affluent Chinese mom-and-pop visitors to Macau, although overall gambling revenue growth in the world's casino capital has slowed sharply in the past three months.
Macau relies on the big-money VIP market for more than 70 percent of gambling revenue but this segment has been hit particularly hard by China's economic slowdown. In its interim results on Wednesday, SJM said revenue from its VIP segment - customers who spend more than us$ 157,000 in a single visit -- fell 0.5 percent on the year. While Macau, located on Chinese southern coast, was one of the world's fastest-growing economies in 2011, the slowdown in China has started to trickle down to the casino-crammed enclave.
SJM's net profit for the first six months of the year totalled us$ 439.72 million compared with us$ 344.2 million in the same period a year ago. The profit was roughly in line with the average forecast of us$ 451.3 million by five analysts polled by Reuters.
The performance in the second half of 2012 will depend on the overall economy of the surrounding region and competition with other new properties opening up, the company said in a statement.
SJM, which has the largest market share among Macau's six licensed casino operators, is not present on the enclave's Cotai strip, home to Sheldon Adelson's Venetian casino and Melco Crown's strobe-lit City of Dreams property. The us$ 11 billion company said its flagship Grand Lisboa hosted over 6.4 million visitors during the first half of the year, an average of more than 35,000 per day.
Known for its garish Grand Lisboa skyscraper, SJM is awaiting notice from the government before it can build a new casino on the up-and-coming Cotai strip, where competitors are already building, but that head start for its rivals has not undermined its market share.
SJM's market share has stabilised in a tight range of 29.4 to 33.6 percent since September 2011, said Gabriel Chan, analyst at Credit Suisse in Hong Kong. The firm has the strongest balance sheet out of the six listed casino operators, with net cash of us$ 2.83 billion.
Seventeen analysts have a 'buy' or 'very strong buy' rating, while three have a 'hold'. There are no sell ratings.
SJM's 90-year-old founder Stanley Ho, one of Hong Kong's most colourful businessmen, transferred the bulk of his shares to fourth wife Angela Leong after a family spat earlier this year, as he moved to distribute his billion-dollar empire among his current and former wives and 17 children.
Local media last week reported that Ho had been admitted to hospital, shining the spotlight once again on the closely watched Hong Kong family and potential succession issues. SJM's earnings follow lacklustre results from rivals Melco Crown, MGM China, Wynn Macau and Las Vegas Sands.
Melco on Tuesday said its net revenue in the second quarter fell 2 percent because of lower volumes at the high end of Macau's casino sector.