A word used by some brokerages, referring to increased operations at Macau casino resort Grand Lisboa Palace (GLP), which opened in July 2021 amid the COVID-19 pandemic, has struggled to gain traction in terms of gambling market share even after travel restrictions were lifted in early 2023.
JPMorgan Securities (Asia Pacific) Ltd, the source of Friday's comments that Grand Lisboa Palace is "disappointed," highlighted the early recovery of resort promoter SJM Holdings Ltd after the Hong Kong-listed casino company's first-quarter earnings highlights on Thursday.
Separately, Seaport Research Partners analyst Vitali Umansky said in a summary on Thursday that "growth has remained tepid so far and in recent quarters," with Grand Lisboa Palace achieving a 2.0% market share in terms of casino gross gaming revenue (GGR) rather than management's target of 5%.
Kotai Real Estate's first-quarter GGR share was HK$39 billion ($5 billion), "up 30 basis points from the previous quarter, but this is largely due to its high retention rate for VIPs," the analyst added.
"We expect the growth rate of Grand Lisboa Palace to be slow and the long-term return on investment in Grand Lisboa Palace to be suboptimal," Mr Umansky said.
He added: "The strategy around Grand Lisboa Palace is still ongoing, and one key area of interest is premium bulk marketing efforts with too few sales staff."
He added that there were 113 sales staff and the company "hopes to have 200 sales staff in a very competitive market."
"We expect that it will take time to build marketing and service capabilities for premium mass," Mr. Umansky said
With capital expenditures expected for 2024 ranging from HK$1.5 billion ($192 million) to HK$1.6 billion ($192 million), SJM Holdings executives "suggested that dividend resumption was not happening right now," according to the analyst.
"We don't expect dividends to resume until after 2025," he added.
Game analysts, who are based in Hong Kong by JPMorgan, said SJM Holdings was "the worst performer" among Macau's six casino concession operators "due to (very) disappointing enforcement of its flagship Grand Lisboa Palace over the past 12, 24 and 36 months."
"The pace of deleveraging (or deleveraging) is deeply disappointing as SJM is the only Macau operator yet to generate meaningful free cash flow," SJM Holdings said in a note on Friday, adding DS Kim, Mufan Shi and Selina Li analysts.
This is against the backdrop of "significant debt service costs" and maintenance and casino concession capital expenditures of "1.5 billion Hong Kong dollars this year," which the brokerage identified as HK$1.8 billion to HK$2 billion per year.
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