The slow pace of ramp of SJM’s Cotai integrated resort Grand Lisboa Palace (GLP) continues to worry analysts, with Seaport Research Partners claiming the property may never achieve “anything approaching positive value creation”.
The comments, from Senior Analyst Vitaly Umansky, come after SJM released its 2Q24 financial results overnight, which showed flat quarter-on-quarter GGR across the group of HK$6.90 billion (US$885 million).
Although GLP, opened in 2021, saw market share of 2.2% for the quarter grow by 22bps from Q1, Umansky noted that this was helped by high VIP hold of 3.7% and described the pace of ramp during the quarter as “weak”. He also noted that ramp had slowed compared with previous quarters.
“While the property will continue to ramp, the return on the investment remains abysmally low and unlikely to achieve anything approaching positive value creation (vs cost of investment) in the foreseeable future (if at all),” he said.
“The strategy around GLP is still being worked on, with the company hiring additional sales and marketing staff during the quarter. With mass table revenue below our expectations in Q2, we expect the build out of marketing and service capability for premium mass to continue to take some time.
“We expect the ramp up at GLP to remain slow and the long-term ROI on the GLP investment is likely to be suboptimal.”
On a more positive note, Umansky noted following the company’s 2Q24 earnings call that excess costs at the company’s satellite casinos – a result of the closure of five properties during the concession re-tender process of late 2022 – continue to come down, which finally saw the satellite segment achieve profitability in the satellite business.
SJM also continues to reduce debt via free cash flow, with leverage down to 8x for the quarter from 13.8x in 2023 and forecast to hit 6.3x by year-end.
