SJM's profits climbed 11.8% to HKD1,195m

Grand Lisboa continues to drive growth.

According to Maybank Kim Eng, SJM reported profit for the first quarter up 11.8% YoY to HKD 1,195m and EBITDA up 11.2% YoY to 2,129m. 

Maybank noted that this translates into a higher EBITDA margins up 10 basis points to 9.7%. First quarter’s EBITDA was 7.7% higher than Bloomberg consensus of HKD 1,977m, as luck was to the house’s advantage with hold rates of 3.30% versus 2.94% last year (1Q13: 3.08% if excluding the reclassification of premium mass to VIP).

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Implication: The Company’s flagship casino, Grand Lisboa, continue to be key impetus for its financial performance, with gaming revenues up 24% YoY to HKD 8.3b. However, market share continue to slide by 1.1ppts to 26.2% in the face of strong competition from the rise of new casino product offerings on Cotai. The group maintained strong VIP revenue growth, an increase of 13.4% to HKD 13.4b.

However, the company fails to capture Macau’s mass market gaming revenue growth without a mass market casino product on Cotai; mass market segment revenue rose merely 4.7% to HKD 5.9b.

Action: SJM trades at 10.4x forward EBITDA, the lower end of Macau gaming sector’s valuations. It also offers a 5.1% forward yield with strong cash balance of HKD 27.7b and debt of HKD 1.7b.