JP Morgan: ‘no surprises’ about SJM’s negative EDITBA for Q4

Macau casino licensee SJM Holdings Ltd (SJM) registered a negative figure of HKD2.09 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the full year of 2020, down 149.6% year-on-year due to Covid-19, the casino operator announced in its latest financial report.
The net loss amounted to HKD3.03 billion for SJM throughout 2020, down 194.3% from its profit the previous year.
Following SJM’s announcement, JP Morgan also released a statement on the same day regarding SJM’s financial result in the fourth quarter (Q4) of 2020, saying the group had posted an EBITDA loss of HKD323 million in Q4 2020, which the financial institution said held “no surprises.”
The group was the only casino operator in Macau that registered an EBITDA loss in Q4 2020. All other operators displayed a positive EBITDA for the quarter. However, JP Morgan said that “it’s somewhat understandable as SJM has been carrying excess staff (up to 2,000) who will be transferred to GLP [Grand Lisboa Palace] upon opening.”
In the note, the analysts called SJM, along with Sands China, one of the two top picks for Macau’s gaming industry as “the stock providing investors with the ‘best story’ to ride the sector momentum, thanks to the [upcoming] opening of Grand Lisboa Palace and a potential turnaround with a refreshed management team.”
The HKD39 billion GLP was originally scheduled to open in the first quarter of this year but was pushed back slightly to the second quarter. JP Morgan forecasts it will open its doors in the May-June period, subject to the pace of the approval of the occupation permit by the governments.
The brokerage is anticipating “a staggered opening for hotels and non-gaming [facilities in the group’s forthcoming integrated resort].”
According to SJM, the construction of GLP, which marks its first entry into the Cotai sector, has been completed and is undergoing a final inspection by the government.
“Although SJM’s results for the full year [of] 2020 reflect the severe reduction in travel and tourism caused by the COVID-19 pandemic, we are encouraged to see the beginnings of recovery starting in the fourth quarter,” said Ambrose So, vice-chairman and chief executive officer of SJM.
So added that he is expecting a continuous gradual restoration of business for SJM throughout 2021.
In 2020, SJM contributed a 14.1% share to Macau’s combined gross gaming revenue (GGR), including 19.7% of mass-market table gaming revenue and 8% of VIP gaming revenue.
Its key property, Grand Lisboa, recorded a drop of 84% in GGR, with its adjusted EBITDA down 137.1% in 2020.