SJM Holdings Earnings: Profit Growth Accelerates, With Nice Turnaround for GLP’s Adjusted EBITDA

Although SJM’s June-quarter adjusted EBITDA of HKD 430 million was slightly behind Bloomberg consensus, we think performance is encouraging, reflecting robust profit improvement, with revenue and adjusted EBITDA returning to 64% and 60% of 2019 levels respectively, up from 46% and 3% in the prior quarter. Management also sees strong momentum into the third quarter, with month-over-month gross revenue rising 10% and adjusted EBITDA up 48% in July. More importantly, the ramp-up of new property GLP is gaining speed, with 2% market share in July, up from less than 1% in the first quarter. The property also delivered positive adjusted EBITDA in July, from a loss in the first quarter. We think a continued ramp-up of both gaming and nongaming facilities, coinciding with improving tourism traffic to Macao, will further accelerate SJM’s sales growth.