SJM Holdings Ltd, the parent company of Macau concessionaire SJM Resorts S.A., is looking to expand its global investor base, according to CBRE Equity Research, banking on its “renaissance” story and the ongoing recovery of the Macau gaming market.
The assessment by CBRE’s John DeCree and Max Marsh comes after the duo spent time on the road with SJM Chief Financial Officer Christopher Ip, where they held multiple meetings to discuss the company’s future prospects.
In a Tuesday note, the analysts pointed out that SJM has historically been the least covered of Macau’s six concessionaires, at least among investors outside of Hong Kong, but said, “This is poised to improve, with the new CFO proactively introducing the company to investors globally.
“Not only is SJM actively engaging the investment community, but it has a renaissance story in the making,” they added. “Under the stewardship of Managing Director Daisy Ho and new management, SJM is institutionalizing the business. The company is looking to reposition Grand Lisboa Palace to better cater to base mass customers, increase visitation to the property, and identify operating efficiencies.
“Some of these initiatives include improving retail tenant occupancy and mix, adding new F&B outlets, new marketing initiatives, and cross-asset cooperation.”
Among the key selling points for the company remains the Macau recovery story, and more specifically its resilience in the face of China’s economic slowdown.
Despite investor concerns continuing to suppress Macau gaming stocks, industry observers have also noted the mainland’s support of its SAR, as evidenced by the recent addition of 10 new cities to the Individual Visit Scheme.
“Investors also remain cautious about the economic outlook in China. However, the continued GGR recovery in Macau through May suggests less correlation to the China economy,” said DeCree and Marsh.
“Although we wouldn’t suggest Macau is immune to slowing economic growth in China, it has proven more resilient. We see two driving forces here. The first is pent-up leisure demand in China after a three-year lockdown. We saw similar trends in other markets upon reopening with demand for experiential travel outweighing demand for consumer goods. This dynamic could be amplified in Macau given the much longer lockdown in China relative to other jurisdictions.
“Second, Macau’s mass market penetration in China remains quite low, but should increase with more relaxed visa policies and improving travel capacity.”
CBRE has, as a result of its recent meetings, substantially raised its target price for SJM shares from HK$2.50 to HK$4.00, noting that although the company’s initiatives will take time, “we see greenshoots for SJM.”
