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Business as usual

 

HIGHLIGHTS FROM THE RELEASE

  • Gaming revenue for 2010 grew by 67.9% to HK$57.2BN and Adjusted EBITDA grew 113.2% to HK$4.8BN
    • VIP gaming operations revenue: HK$38.9BN
    • Mass table revenue: HK$17.2BN
    • Slot revenue: HK$1.2BN
  • Grand Lisboa Adjusted EBITDA was HK$2.6BN in 2010; and had an Adjusted EBITDA margin of 16.4% based on HK GAAP or 26.4% based on US GAAP calculations
  • "Casino Grand Lisboa’s daily net-win per mass market gaming table increased by 23.5%, net win per VIP table increased by 7.8% and net-win per slot machine increased by 12.2%."
  • "New VIP gaming areas opened on the 38th and 39th floors of the Grand Lisboa in September 2010 and the new Grand Lotus gaming area for premium mass market customers opened in February 2011."
  • 4Q2010 gaming revenue grew 19.3% sequentially
  • "SJM continued to lead in market share of the Macau casino gaming market, with 40.1% of mass market table gaming revenue and 29.5% of VIP gaming revenue, and increased its overall market share to 31.3% from 29.4% in 2009"
  • Cash and equivalents at YE were HK$15.3BN
  • The Board recommended the payment of a final dividend of HK30 cents per ordinary share. If approved, the dividend is expected to be paid on May 18, 2011 to the shareholders of the Company whose names appear on the register of members of the Company on 29 April 2011

CONF CALL NOTES

  • Especially pleased that they exceeded that of the Macau market in 2010
  • New casino Oceanus has ramped up nicely and new third party model is working well
  • 2011 has started off strongly. Launched new floors at Grand Lisboa
  • Cotai: Currently awaiting the formalization of their license.  They plan on building an integrated resort that will include a state of the art Mass Casino and non gaming facilities
  • Ho family dispute: reiterated that there will be no impact on SJM holdings and no change in management

Q&A

  • Will there be any change in the Board of Director?
    • No - the number of board members will stay the same
  • Cotai timeline? Land grant must be given first. Once that is approved then the final engineering drawing get done. Traditionally the government lets the market decide who gets to develop first depending on each concessionaire's ability to get financing.  Won't start building until they have an understanding on where the table cap will go in 2 years from now
  • Cost of the project?  There is a shortage of unskilled labor which has caused the minimum wage to rise.  On the technical side - there is also some pressure.  There hasn't been as much pressure on the gaming employee side.  They do have a 5% salary inflation pay raise in place to retain good people.
  • Is 4Q2010 EBITDA a good run rate for 2011 EBITDA?
    • There are no one time items in the 4Q... EBITDA was just a hair above 3Q EBITDA.  So yes its a good base
  • Oceanus: began the year with 269 tables, today its running with a 172 tables and 27 tables at the Jai Lai.  They are doing about 2.5x per table of what they were doing - part of that is due to trimming tables.
    • There are a lot of shared costs between Grand Lisbao and Oceanus which is why they don't break out EBITDA between the properties
  • The premium Mass has been very strong for the first 2 months of 2011 at the Grand Lisboa in 2011 but the hold rate has been very soft as well in VIP.
  • Cotai - they would not raise cash from new stock issuances or convert sales.  They do have over HK$15BN of cash on hand which would take a while to draw down
  • Why was the 4Q EBITDA margin down? There was a greater mix of VIP than Mass. High 3%-4% range is a good range for margin
  • There has been a lot of work and some construction disruption at the Lisboa
  • Don't anticipate that the opening of the Galaxy World will have a large impact on their market share. They are going to be doing a pre-emptive campaign in advance of the Galaxy opening.
  • Are they hitting capacity constraints at Grand Lisboa?
    • During the big holiday periods they are capacity constrained on the main gaming floor but have managed to migrate a lot of that traffic to the second floor.
    • If they add tables they need to remove tables from other properties
  • Any impact from the Japan earthquake?
    • they have very few Japanese players at their casinos