Macau casino operator SJM spikes 8pc as Goldman upgrades target price ahead of hotel opening

PUBLISHED : Thursday, 31 May, 2018, 6:52pm
UPDATED : Thursday, 31 May, 2018, 10:46pm

SJM Holdings, the Macau gaming operator owned by the family of casino mogul Stanley Ho, posted its biggest intra-day gain in over six years after US broker Goldman Sachs raised its target price to reflect the opening of its new flagship property, the Grand Lisboa Palace in mid-2019.

SJM surged to HK$11.60, up 11.8 per cent marking its biggest intra-day gain since October 2011 before closing at HK$11.26 on turnover of HK$1.13 billion.

Goldman Sachs raised SJM’s target price to HK$$12.7 from HK$12, as it expects the company to benefit from the industry’s gross gaming revenue growth in the second quarter and improved Ebitda in the past two quarters.

The Grand Lisboa Palace, the first integrated resort being developed by SJM on Cotai, the city’s new gambling and tourism area, will feature 2,000 hotel rooms and suites, facilities for meetings and conferences, shopping, dining and entertainment, and a casino.

HSBC said it remained constructive on the sector because of the strength in the mass market, driven by new capacity and infrastructure upgrades, which could potentially drive further re-ratings.

Melco Resorts & Entertainment recently announced that its new flagship hotel, Morpheus, was on target to open on June 15, located at the City of Dreams.

While policy risk was not a major worry, HSBC said the upside could be capped because of a potential seasonally weaker second quarter due to the Fifa World Cup.

Casino operator’s earnings in Macau were hit after China launched a widespread crackdown on corruption in 2014. Besides, Beijing’s tighter controls on capital flight at the end of 2016 also did not help matters.

In May, Xinhua News Agency reported that the police had cracked down on an underground banking ring in Gongbei, Zhuhai, which is on the border with Macau, making it harder for tourists to exchange currency at illegal foreign exchange stores.

Melco International Development climbed 4.6 per cent to HK$28.45, Galaxy Entertainment Group rose 1.2 per cent to HK$69.05, and Wynn Macau advanced 2.4 per cent to HK$30.10. MGM China Holdings was 2.9 per cent higher at HK$22.80 and Sands China added 2.40 per cent to HK$46.95.