Before 1994, Stanley Ho’s gaming empire, Sociedade de Jogos de Macau SA aka SJM Holdings, was the only game in town. Five companies have since joined the fray as the government loosened restrictions, but SJM Holdings remains the dominant player. The company had roughly one-third of the market in the first half of the year, followed by Sands China at around 20%.
Though SJM Holding’s stock price has advanced fairly steadily since its listing in late 2008, since early August it has lost about 20% of its value. That drop seems unwarranted: SJM Holdings’ financial figures far outperform those of your average China retailer.
The business is surely no slouch. SJM Holdings’ Grand Lisboa is a strong brand, especially among VIP gamers, the fastest-growing segment of the Macau market. (Grand Lisboa rakes in a fantastic US$64,141 per VIP table.) VIP gaming accounted for around 70% of SJM Holdings’ revenues in the first half, and helped fuel a 41.5% annual increase in total revenue and a 56.4% increase in adjusted EBITDA.
The company has also proposed a new mixed-use project in Cotai. Because the suggestion fits in with the government’s goal of diversifying into entertainment, some analysts say it could get a go-ahead before others planned by MGM China and Wynn Macau.
That said, SJM Holdings seems likely to keep losing market share to competitors, especially MGM China, which opened the Galaxy Macau integrated resort this year, and to Sands China. The two projects will increase the number of gaming tables in Macau by about 14% to 5,500, the maximum permitted by the government until 2013.
This competition is putting a dent in SJM Holding’s share of the mass market, which has dropped to 38.2% in 2011 from 41.2% the previous year. Moreover, the company’s profit margin, measured in adjusted EBIDTA, remains lower than the Macau average.
SJM Holdings remains a strong player, but it lacks the focus and momentum of some competitors. In late September, the 96-year-old Stanley Ho sold off the remaining 0.09% stake in his empire. Perhaps that marked the end of an era in more ways than one.
