SJM Holdings Demonstrates Slight Resurgence: Q1 2025 Indicates Times of Improvement
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SJM Holdings' fortunes have taken a turn for the better in early 2025, reporting a modest but significant profit that signals a potential stabilization for the oldest gaming operator in Macau. After navigating the choppy waters of the post-pandemic era, the company has managed to take advantage of renovated properties and shifting market dynamics to secure its first profitable quarter since the pandemic disrupted Macau's casino industry.
The earnings report showed a HK$31 million ($4 million) profit for Q1 2025, marking a significant improvement from the HK$74 million ($9.5 million) loss seen in the same period the previous year. Although this profit is just a fraction of rival Galaxy Entertainment's $1.3 billion quarterly profit, it nevertheless shows SJM's gradual adaptation to Macau's transformed gaming landscape.
The Shift in Macau's Gaming Market and SJM's Place Within It
Broadly speaking, the Macau gaming market has undergone significant structural changes, with the mass-market segment now driving industry growth. In Q1 2025, the mass-market casino sector, including slot machine activity, generated MOP43.20 billion (US$5.40 billion), representing a modest 0.6% increase year-over-year. This segment now makes up roughly 74.9% of Macau's total gaming revenue, symbolizing the market's dramatic move away from VIP-dependent business models.
Against this evolving backdrop, SJM Holdings has raised its market share to 13.5% in Q1 2025, climbing from 12.4% during the same period in 2024—a gain of 1.1 percentage points that signals the company's improving competitive position. This growth comes despite what SJM's Chairman Daisy Ho described as "softer consumer spending" across the market. Ms. Ho noted:
While the market experienced softer consumer spending in the first quarter, SJM's performance remained steady on a sequential basis. The property enhancements undertaken throughout 2024 are now coming to fruition, with a pipeline of new offerings set to launch in phases-serving as growth levers for the mass market.
Financial Performance: looking beneath the figures
SJM's total net revenue hit HK$7.48 billion ($958 million) for the quarter, representing an 8.1% increase compared to Q1 2024. This growth outpaced Macau's overall market expansion, indicating SJM is slowly reclaiming lost ground against competitors. Net gaming revenue, which constitutes the bulk of SJM's business, rose 7.5% year-on-year to HK$6.95 billion ($890 million).
The company's gross gaming revenue (GGR) showed even stronger performance, climbing 9.6% to HK$7.55 billion, after deducting commissions and incentives totaling HK$602 million ($77 million). This GGR growth rate outperformed the broader Macau market, helping explain SJM's market share gains during the quarter.
Adjusted EBITDA increased by 10.9% year-on-year to HK$958 million ($123 million), with the Adjusted EBITDA margin improving slightly by 0.3 percentage points to 12.8%. While this progress is positive, SJM's EBITDA margins still fall substantially below the industry average of approximately 28%, illustrating lingering efficiency challenges. The company's cost-to-revenue ratio stands at a concerning 91.8%, inflated by Grand Lisboa Palace's $1.9 billion expansion and rising labor expenses across the portfolio of properties.
A Tale of Two performances: Grand Lisboa Palace vs. Grand Lisboa
SJM's property portfolio shows signs of divergent trajectories, with the flagship Grand Lisboa Palace in Cotai gradually gaining momentum while the historic Grand Lisboa on the peninsula faces headwinds.
Grand Lisboa Palace: Growth amid obstacles
The Grand Lisboa Palace Resort Macau, SJM's ambitious move into Cotai that opened during the pandemic in 2021, generated total revenue of HK$1.93 billion ($247 million) in Q1 2025, representing a substantial 36.2% increase compared to the same period the prior year. GGR at the property rose even more dramatically, climbing 41.1% to HK$1.57 billion ($201 million).
More significantly, GLP's market share within Macau ascended 0.8 percentage points to 2.8%, compared to 2.0% in Q1 2024—suggesting the property is finally establishing itself within the competitive Cotai Strip landscape. The property contributed approximately 47.7% of SJM's total revenue, making it the company's largest single revenue generator.
However, despite this growth, Grand Lisboa Palace continues to face substantial challenges. The property's EBITDA remained negative at approximately -$18 million for the quarter, highlighting ongoing operational inefficiencies. Its isolated location away from Cotai's main cluster necessitates shuttle services that 68% of surveyed guests consider "inconvenient," while its branding lacks the thematic flair of competitors like The Londoner or Studio City. Additionally, the property remains saddled with the legacy of its original design, which allocated significant space to VIP operations that have since collapsed following Beijing's 2022 crackdown on junkets.
Grand Lisboa: The Aging Stalwart Battling Winds
Meanwhile, the Grand Lisboa Hotel on the Macau Peninsula—SJM's traditional flagship property—reported a decline in total revenue of 3.6% to HK$1.89 billion ($242 million), with GGR dropping 4.4% to HK$1.79 billion ($229 million). This decline comes despite recent renovations and underscores the ongoing challenges faced by peninsula properties in the face of Cotai's dominance.
Nevertheless, the aging Grand Lisboa continues to be vital to SJM's profitability, contributing an estimated 92% of the group's EBITDA despite having been operational since 1970. The property's occupancy rate of just 22% trails far behind competitors like Wynn Palace's 89%, demonstrating significant room for improvement in non-gaming amenities and overall property appeal.
Satellite Casinos and Other Properties
SJM's other self-promoted casinos, including Jai Alai Hotel, Kam Pek Market, and Sofitel at Ponte 16, reported combined total revenue of HK$1.42 billion ($182 million), marking a 6.8% year-on-year increase. GGR in this segment grew 6.6% to HK$1.34 billion ($172 million).
In the satellite casino segment, which includes nine properties operating under SJM's license, GGR grew 7.6% year-on-year, rising from HK$2.64 billion ($338 million) to HK$2.85 billion ($365 million). However, uncertainty lingers over these operations, as the transitional period for satellite casinos is scheduled to end on December 31, 2025, with no official decision yet made regarding their future regulatory status.
A Promising Future for Non-Gaming Revenue
While gaming remains SJM's main revenue driver, the company's non-gaming segments showed encouraging growth during Q1 2025. Revenue from hotel, catering, retail, and leasing operations surged by 16.4% year-on-year to HK$531 million ($68 million). This growth outpaced gaming revenue expansion and aligns with Macau's government-backed shift towards a more diverse tourism economy.
The company reported an average hotel occupancy rate of 97.3% across its properties, representing a 4.8 percentage point increase from the 92.5% recorded in Q1 2024. This high occupancy rate, which surpasses pre-pandemic levels (89.5% in Q1 2019), underscores strong visitor demand for SJM's accommodations, despite challenges in converting this traffic into gaming revenue at some properties.
Financial Stability and Banking Facilities
SJM's syndicated banking facilities encompass a HK$9 billion ($1.16 billion) term loan and a HK$10 billion ($1.29 billion) revolving credit facility. As of March 31, 2025, approximately HK$3.8 billion ($490 million) of the revolving credit facility remained undrawn, providing the company with financial breathing room to manage operations and pursue strategic initiatives.
However, the company's high cost structure and relatively thin profit margins could eventually strain these financial resources if operational efficiencies aren't improved. With a cost-to-revenue ratio exceeding 90%, SJM faces ongoing challenges in converting its revenue growth into sustainable profitability.
Macau's Mass Market Evolution: A Brighter Future for SJM?
SJM's performance mirrors the broader transformation of Macau's gaming industry, which has decisively pivoted towards mass-market segments following the collapse of VIP junket operations. Across Macau in Q1 2025, mass-market baccarat alone generated MOP34.32 billion (US$4.29 billion), accounting for 59.5% of the city's total GGR. Slot machine revenue added an additional MOP3.27 billion (US$405 million), making up approximately 5.7% of the market. Revenue from operators of crypto slots has also witnessed significant increases.
Meanwhile, VIP baccarat revenue, which once dominated Macau's gaming landscape, increased by only 0.5% year-on-year to MOP14.46 billion (US$1.80 billion), accounting for 25.1% of the quarter's total GGR. This figure represents just 38.9% of the level seen in Q1 2019, underscoring the segment's dramatic contraction in the post-pandemic regulatory environment.
SJM appears better prepared for this new reality than previously, with its Non-Rolling GGR for self-promoted casinos reaching an impressive 148% of the equivalent figure from Q1 2019. This demonstrates the company's progress in transitioning towards mass-market segments, though challenges remain.
Looking ahead, Ms. Ho acknowledged ongoing macroeconomic headwinds but expressed confidence in "the long-term fundamentals of Macau's tourism economy." The company's focus on property enhancements and new offerings targeted at mass-market segments suggests a coherent strategic direction aligned with Macau's evolving regulatory and market landscape.
However, fiscal concerns lurk over the broader Macau market. Chief Executive Sam Hou Fai recently expressed concern about potential budget deficits if monthly gaming revenues fall below MOP15 billion (US$1.88 billion), highlighting the economic pressures facing the region. For SJM specifically, the challenge remains transforming its modestly growing revenue into sustainable profitability that can support long-term investment and shareholder returns.
As SJM navigates this complex landscape, its ability to boost operational efficiencies, particularly at Grand Lisboa Palace, may determine whether its return to profitability represents the beginning of a sustainable recovery or merely a temporary respite in an ongoing struggle for relevance in Macau's transformed gaming market.
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- In Q1 2025, SJM Holdings reported a profit of HK$31 million, marking a significant improvement from the previous year's loss, indicating a potential stabilization for the oldest gaming operator in Macau.
- Amid Macau's gaming market transformation, SJM Holdings managed to increase its market share to 13.5%, climbing from 12.4% the previous year, demonstrating the company's improved competitive position.
- While the overall market experienced softer consumer spending in Q1 2025, SJM's performance remained steady, with property enhancements undertaken throughout 2024 starting to come to fruition.
- SJM's grandiose move into Cotai, Grand Lisboa Palace, generated revenue of HK$1.93 billion in Q1 2025, a substantial increase from the previous year, despite ongoing operational inefficiencies.
- The mass-market segment, including slot machine activity, represented 74.9% of Macau's total gaming revenue in Q1 2025, symbolizing the market's dramatic move away from VIP-dependent business models.
- As SJM navigates the complex landscape of Macau's transformed gaming market, the company's ability to boost operational efficiencies, particularly at Grand Lisboa Palace, may determine whether its return to profitability represents a sustainable recovery or a temporary respite.
