SJM Earnings: Solid Results Slightly Above Expectations, Further Improvements Ahead

We maintain our earnings forecasts and fair value estimate of narrow-moat SJM at HKD 4.68 per share, following the firm’s solid first-quarter performance that reflects a gradual catchup of its new property Grand Lisboa Palace, or GLP, in profitability and market share in gross gaming revenue, or GGR. Its new business initiatives in setting up a centralized platform to increase the connectivity between its properties, and expanding the marketing team are bearing fruit, which helped to drive the group’s first-quarter mass segment GGR to 134% of its 2019 level and 162% in May Golden Week holiday, compared with the 115% in the December quarter. We expect these initiatives, along with additional product offerings—including more food and beverage venues, ramp-up of shopping malls, as well as construction of Grand Hall for concerts and other nongaming events, to further improve the firm’s operating efficiency and accelerate sales growth at GLP in the coming quarters.