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The Macro Show Replay | November 3, 2015

 


SJM 3Q 2015 CONFERENCE CALL NOTES

MGMT COMMENTS

  • GGR -37.9% YoY in Q3, -39.6% for the first nine months 
  • Adj EBITDA, -49.5% YoY in Q3 - HK$884M
  • Adj EBITDA margin = 7.8% in Q3, down from 9.6% in Q3 2014
  • GGR Share 22%
  • Grand Lisboa
    • GGR = -48.5% YoY, HK$3,450
    • Adj EBITDA -49.2% YoY, HK$507M
  • Challenging factors still persist, hurting opportunity for profitability 
  • Market may be stabilizing but they are not forecasting an upturn just yet
  • Still remain optimistic on the long term prospects of Macau 
  • EBIITDA margin squeezed due to labor costs and lower volumes
  • Corporate overhead hurt their satelite casinos EBITDA margins, and additionally cash rebates hurt EBITDA margins  
  • VIP remains unstable, currently have 454 VIP tables vs. 557 at beginning of the year 
  • VIP Tables at Grand Lisboa - 152 currently vs 177 at beginning of the year 
  • First Q in SJM's history where Mass revenue exceeded VIP revenue 
  • Occ up to 85% in the Q, visitation slightly up at most properties. 
  • Visitation at Grand Lisboa +7% in the Q, trends in October have been promising  
  • Cost savings associated with labor remains very difficult to attain in Macau 
  • Lisboa Palace on schedule for 2017 and in line with budget expectations 
  • CapEX HK$1.8 billion YTD, big CapEx year will be 2016 at roughly HK$17 billion 

Q&A 

  • Grand Lisboa VIP revenue -58% YoY 
  • Grand Lisboa Mass QoQ = -8%, YoY -21%
  • Cost cutting efforts slowly begin to show some positive signs, but they have just been implemented so it will take time. Expect more cost savings to kick in the future. 
  • On the revenue side, it is difficult to guide because of the new supply that is coming on line
  • Premium mass is growing, targeting a mid tier premium customer and opening a new premium mass pit in early 2016 
  • Total VIP Hold rate = 3.4% for the Q, normalized roughly 2.9% 
  • Financing for Lisboa Palace, expect to have more details in the future on bank financing
  • Reasons for EBITDA decline despite stable revenues - mostly due to older properties and satelite casinos. Older properties cost of revenue is higher 
  • Junket color - difficult environment and tough to predict 
  • Do satelite casinos have chance to survive? Yes, customers are sticky at those properties, they will survive 
  • MSC - no comments on cannibilization but consider it a nice property
  • Not aware of any changes in transit visa policies
  • Comp room ratio, roughly 70% of the rooms go to casino players
  • No update on Macau Theme Park land 
  • VIP Hold Rate at Grand Lisboa Q3 2014 2.88%, Q3 2015 3.24%
  • Hold rates at all casinos were not the reason for weaker EBITDA margins, cash rebates were likely the driver of that. 
  • Confident in their abilities to remain competitive despite the new supply that has come online in Macau

November 3, 2015

November 3, 2015 - Slide1

 

BULLISH TRENDS

November 3, 2015 - Slide2

November 3, 2015 - Slide3

November 3, 2015 - Slide4

 

BEARISH TRENDS

November 3, 2015 - Slide5

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November 3, 2015 - Slide7

November 3, 2015 - Slide8

November 3, 2015 - Slide9

November 3, 2015 - Slide10

November 3, 2015 - Slide11

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