Morningstar

Morningstar, Inc.

Equity Bottom-Up

As one of six casino licence holders in Macau, SJM Holdings benefits from insatiable Chinese demand for gaming, underpinned by rising per capita disposable income in China. The additional supply by major casino operators in the next few years will increase higher-spending overnight visitors and revitalized appeal for Macau. With the completion of the Hong Kong-Zhuhai-Macau bridge and light railway transit in 2018, Macau's carrying capacity for tourists will increase. In addition, the neighboring…

Narrow-moat SJM’s first-quarter adjusted EBITDA accounted for 31% of our full-year estimates, beating our estimates, while revenue is tracking towards our full-year estimate. The beat was helped by a HKD 57 million addition to adjusted EBITDA resulting from changes in accounting that now places lease expenses below the adjusted EBITDA line. We expect the same addition to adjusted EBITDA in the next quarter. Adjusted for the accounting change this quarter and the HKD 109 million one-off provision…

<p>Despite fears around a trade war and China's economic slowdown, the narrow-moat Macau gaming market’s competitive positioning and demand remain strong, and we believe the current weak sentiment presents a good buying opportunity for long-term investors. Our fair value estimate for Sands China is now HKD 45 per share (versus HKD 42 prior), for Galaxy Entertainment HKD 58 per share (versus HKD 54), for Melco Resorts $21 per share (versus $22), for MGM China HKD 20 per share (versus HKD 21.50 per…</p>

Hong Kong

SJM Holdings Limited offers amusement and recreation services.  The Company operates casinos, hotels, and other tourism-related facilities in Macau.

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