3Q23 results below; GLP’s Adjusted EBITDA turned positive in selected months
- 3Q23 Adjusted EBITDA reached HK$566m, up 31.5% q-o-q. Attributable loss narrowed by 2% q-o-q to HK$410m, below expectations largely due to slower GGR expansion.
- Latest performance, however, is encouraging, with Oct being the best month at group level since COVID-19, beating the previous best month of Aug by 8%.
- Grand Lisboa Palace (“GLP”) also achieved positive Adjusted EBITDA in Jul, Aug and Oct 2023, and should progress further ahead. We maintain BUY given SJM’s medium-term prospects; TP under review.
Mass GGR at 105% of pre-COVID level. By Oct 2023, SJM’s gross gaming revenue (GGR) for its mass segment (excluding GLP and satellite casinos) was 105% of the pre-covid level, while Satellite’s was 52%. On the whole, GGR at group level went up by 27% m-o-m in Oct 2023, including GLP’s GGR that went up 55% m-o-m in Oct 2023. While Nov 2023 is seeing some seasonal fluctuations, GGR performs at a similar level of Aug 2023, posting a supportive trend.
GLP to see gradual improvements. Aside from some immediate attempts to recruit more gaming customers and increase membership, partly through assembling more casino marketing executives to drive traffic, some mid-term efforts also involves liaising with the Macau government for cleaning up construction sites adjacent to GLP that has seen some progress, as well as getting approval for a bridge to connect GLP to the Cotai East Station – a hub that will also connect MGM Cotai, Wynn Palace and Melco’s properties. The gradual fill-up of its retail space (occupancy rate: 76%; hope to reach 85%+ in 12-18 months), with the roll-out of more eateries, and targets to launch at least 1 concert per month starting next year, plus current construction of a multi-purpose hall should all build further tractions.
Please see below for more details on 3Q23 results and some latest outlook:
- 3Q23 net revenue was HK$5.4bn (3Q22: HK$913m) and Adjusted EBITDA reached HK$566m (3Q22: negative HK$968m), or up 31.5% q-o-q, at an Adjusted EBITDA margin of 9.6% (3Q22: -94.2%). Excluding EBITDA loss from satellite casinos, SJM’s EBITDA reached 68% of the pre-COVID level of 3Q19. Attributable loss was HK$410m (3Q22: HK$1.9bn loss), which narrowed by 2% q-o-q.
- In 9M23, net revenue tripled to HK$14.1bn (9M22: HK$4.7bn) and Adjusted EBITDA reached HK$1bn (9M22: negative HK$2.1bn), at an EBITDA margin of 6.7% (9M22: -41.6%). Attributable loss was HK$1.7bn (9M22: HK$4.7bn loss).
- Specifically, Grand Lisboa Palace (“GLP”) achieved positive Adjusted EBITDA in Jul-Aug 2023, although 3Q23 still recorded a negative Adjusted EBITDA of HK27m (2Q23: negative HK$63m).
- As of Sep 2023, net debt was HK$23.7bn, and the company also had HK$3.3bn of undrawn banking facilities.
- Overall, market share for 3Q23 was 12.1% (3Q22: 17.7%; 3Q19: 13.8%). Market share for 9M23 was 11.9% (9M22: 16.3%; 9M19: 14%).
- Non-rolling GGR up 41% q-o-q in 3Q23 and ramping up nicely into 4Q23; but rolling GGR had some volatility, down 33% in the quarter largely due bad luck. In fact, by quarters, daily non-rolling GGR moved up from HK$13.5m in 1Q to HK$22.9m in 2Q23 and to HK$31.5m in 3Q23. Rolling daily GGR surged from HK$45.5m in 1Q23 to HK$82m in 2Q23, yet dropped to HK$70.3m in 3Q23, and picked up in Oct again, showing more volatile patterns.
- GLP targets to reach over 1.7% market share by 4Q23 that could gradually climb to 2%, and then 3% to 4% by 2025, and from 4% to 5% in 2026; eventually attaining 5-6% upon resolving all current challenges.
- Group level q-o-q cost increase was only about 2-3% in 3Q23 and managed well. 4Q23 could see another 2-3% ramp up because of more hotel and F&B staff as GLP continues to open up. Thus far, GLP has already fully opened its GLP towers (1,350 rooms) and The Karl Lagerfeld (271 rooms); with Palazzo Versace Macau also opening up 102 rooms, making c.1,723 rooms up and running.
- SJM stays very intact in its non-gaming commitments so far. Actual projects for 2024 have already been submitted to the government and can disclose more details after the approval.