SJM surprises with 27pc gain on Grand Lisboa performance Macau casino operator Galaxy Entertainment Group wrote down the value of its gaming licence by HK$8.16 billion yesterday as first-half pre-tax earnings plunged 51.6 per cent, while rival SJM Holdings surprised with a 27 per cent increase in pre-tax earnings. Galaxy bought the licence from the family of its controlling shareholder, property and construction entrepreneur Lui Che-woo, in 2005 in a HK$18.4 billion deal and carried it on its books at HK$14.47 billion as recently as January. But the company said yesterday that an independent valuation by American Appraisal China put its current value at just HK$5.8 billion as of June. The one-time write-down is targeted to help Galaxy clean up its balance sheet by lessening amortisation charges. The accounting manoeuvre should pave the way to reporting net profit and paying dividends to its beleaguered shareholders, which include British private equity firm Permira Advisers with a 20 per cent stake. Galaxy management blamed increased competition and the higher commissions it was forced to pay its VIP gambling junket agents for the 51.6 per cent decrease in earnings before interest, tax, depreciation and amortisation. Ebitda fell to HK$356 million in the first six months from HK$737 million a year earlier, and plunged 69 per cent to HK$146 million in the second quarter from HK$470 million a year ago. Revenue fell 22 per cent during the second quarter to HK$2.67 billion. Galaxy's flagship StarWorld casino hotel won back a lower than expected 2.4 per cent of its HK$49.62 billion in VIP gambling chips during the quarter. That compared to a better than average 3.2 per cent win rate on HK$53.2 billion in VIP chip sales for the same period a year earlier. Meanwhile, Stanley Ho Hung-sun's newly listed SJM Holdings reported better than expected first-half results despite declining revenues because of impressive performance at the Grand Lisboa, which opened in February last year. SJM said first-half net profit rose 8.1 per cent to HK$571 million from HK$528.4 million a year ago, beating the forecast of HK$559 million published in the company's June listing prospectus by 2.1 per cent. Despite a 4.5 per cent drop in revenue to HK$15.45 billion, SJM's adjusted ebitda increased 27.4 per cent to HK$981.3 million. The Grand Lisboa's pre-tax earnings surged 500 per cent after the launch of its VIP gaming operations in August last year to HK$810 million, accounting for 82.5 per cent of the company's total ebitda. The Grand Lisboa trailed the HK$928 million in ebitda booked at the Sands Macao during the first half but was nearly triple the HK$295 million that Galaxy reported for StarWorld. SJM closed 44 of its 75 franchised VIP rooms at 19 casinos around Macau. The number of VIP rooms fell to 44 from 75, while VIP tables declined to 231 from 305 units a year ago. As a result of the consolidation, SJM's gross sales of VIP gaming chips fell 13 per cent to HK$309.17 billion and net VIP revenue fell 12.1 per cent to HK$9.27 billion. The Grand Lisboa accounted for about 33 per cent of both VIP chip sales and VIP revenue.