SJM 1Q2011 CONF CALL NOTES

Solid quarter, favorable outlook

 


HIGHLIGHTS FROM THE RELEASE

  • 1Q results:
    • Group gaming revenue: HK$18,141MM
      • VIP gaming revenue:  HK$12,748MM (565 tables)
      • RC Volume: HK$453.9BN; 2.81% hold
      • Mass gaming revenue: HK$5,015MM (1,179 tables)
      • Slot revenue: HK$378MM (3,943 slots)
    • Total Group revenue: HK$18,271MM
      • Hotel, catering and other revenue of HK$130MM
    • Casino Grand Lisboa:
      • Gaming revenue of HK$5,334 and Adjusted EBITDA of HK$882MM
      • occupancy: 88.3% and ADR: HK$2,055
    • Other self-promoted casinos (Lisboa, Jai Lai, Oceanus, 3 slot halls and Tombola Hall):
      • Gaming revenue of HK$3,008 and Adjusted EBITDA of HK$332MM
    • Satellite Casinos (14 3rd party promoted casinos and one slot hall which ceased operation on 1/19/11):
      • Gaming revenue of HK$9,799 and Adjusted EBITDA of HK$391MM
    • Adjusted EBITDA: HK$1,678MM
    • 31.9% market share
    • HK$17,735MM of debt and cash of HK$3,852MM
    • Capex: HK$205MM
      • "Work on the upper floors of Grand Lisboa, for phase 3 of Ponte 16 Resort and for equipment
        purchases"
  • "To be more comparable to casino companies reporting in the United States, commissions and
    discounts paid to players and promoters would be deducted from revenue before calculating
    Adjusted EBITDA margin. Using this method, the Group’s Adjusted EBITDA margin for Q1 2011
    was 16.5%.  If the Group’s revenue is further adjusted to include the net revenue of self-promoted
    casinos plus the net revenue contribution (after reimbursed expenses) of the Group’s third
    party-promoted casinos and slot halls, the Group’s Adjusted EBITDA margin would be 30.6%."


CONF CALL NOTES

  • Had a record month in March
  • Oceanus is making an increasing contribution to Group results
  • 30 cent dividend was approved last month, adding together the interim dividend produced a 53% payout

Q&A

  • Added 31 new VIP tables at Grand Lisboa
  • Grand Lisboa - QoQ results were impacted by poor hold - held only 2.6% vs. 3.0% in 4Q2010.  Chips grew 14.4% YoY.  They're up 21.5% QoQ on the Mass gaming win.  VIP margin dropped by 2.9% offset somewhat by the increase in Mass margins (up +4%).
  • Other owned hotels had a margin of 11% - and think that's a sustainable margin going forward.  The improvement and growth in that group is due to ramp at Oceanus and good results at the Old Lisboa
  •  Don't see any impact yet from Galaxy Macau. Had no impact at all at Grand Lisboa over the last 2 days... the weekend was better than last weekend. Really too early to tell.
  • Traditionally, their 2H is better than the first half of the year.  Yes - if you annualize the 1Q EBITDA you come out ahead of consensus.
  • Still waiting for government approval of their Cotai project. They haven't had any back and forth in 3 months.  So its unclear if the government will ask for more data or not. Right now they are just waiting.
  • Seems like gaming spend per customer is growing in the market.  Rated play is playing more. They seem to be attracting visitors with more liquidity.
  • Non-gaming revenues are just reaching their stride since they added a lot of non-gaming components over the last year or so
  • YoY their staff costs have increased 8%.  They also have 800 fewer staff members though YoY.  Granted a 5% raise for the year across the board as well.
  • Migration in VIP tables is almost entirely at 3rd party migration. Took on 50 more VIP tables at Grand Lisboa and 15 more mass tables.
  • Oceanus results are ahead of plan. Still tracking at 35,000/table mark.  Trying to grow the utilization of tables. Think that there is a bit more growth left there for the next 3 quarters.
  • Grand Lotus - won't really kick in until the second half of the year for premium Mass play as they are still doing some renovations there.

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