Macau’s SJM Holdings is still carrying 2,150 excess staff following the closure last year of five satellite casinos previously operating under its license, costing the company around HK$169 million (US$21.6 million) in “redundant payroll” as of the June 2023 quarter.
Details of the staffing situation were revealed during SJM’s 2Q23 earnings call on Monday after the concessionaire reported an Adjusted EBITDA loss of HK$103 million (US$13 million) from its remaining satellite casinos, largely flat with the HK$105 million loss reported in Q1. Those remaining satellites are Casa Real, Landmark, Emperor Palace, Fortuna, Grandview, Kam Pek Paradise, L’Arc, Legend Palace and Ponte 16, with the company having seen Babylon, Diamond, Golden Dragon, Million Dragon and Royal Dragon all close in 2022 amid changes to how satellite casinos are administered under Macau’s new gaming law.
Macau’s Secretary for Economy and Finance Lei Wai Nong made it clear last year that concessionaires must employ former casino dealers “unconditionally” should satellite casinos operating under their license close.
In a note following SJM’s earnings call, JP Morgan analyst DS Kim explained that “the pace of rationalization of excess [SJM] staff was much slower than expected [in Q2].” He also revealed the company wants to “fully rationalize its workforce by the end of 2025, so there still appears to be a long way to go.”
Some of those excess staff will be gobbled up by the gradual ramp of SJM’s Cotai integrated resort, Grand Lisboa Palace, with the company revealing in its results announcement that it expects to have completed the training of staff members by the end of this year to bring GLP’s full complement of hotel rooms up to 1,892.
Nevertheless, Kim noted that SJM is the only operator in Macau with higher OPEX (operating expense) than pre-COVID levels at HK$18.6 million per day in Q2 versus HK$14 million per day in 2019.
“This is primarily due to the opening of GLP and the aforementioned excess staff,” he said, “but the numbers are the numbers and SJM would need to ramp up GLP much faster to enjoy a similar level of profit recovery as its peers.”
In a separate note, Credit Suisse analysts Kenneth Fong and Sardonna Fong revealed that SJM management expects GLP’s market share to increase over time from its current 2% to between 3% and 3.5% – and possibly up to 6% in the long-term – once some lagging issues are addressed. These, they explained, include the government cleaning up the area surrounding GLP, building a footbridge to provide better connectivity to the Cotai Strip, providing more F&B offerings and increasing hotel occupancy from 69% to around 90% by late 2024.
SJM is, meanwhile, planning a substantial renovation of its peninsula property Grand Lisboa, which would “focus on rooms, and introducing more casual restaurants for mass and retail areas by taking out the junket rooms,” Credit Suisse said. “The project should start in 2024 and complete by 2026.”