FIRST SHANGHAI: Maintains "buy" rating on SJM HOLDINGS (00880) with a target price of 2.9 Hong Kong dollars.

FIRST SHANGHAI released a research report stating that they maintain a "buy" rating for SJM HOLDINGS (00880). With the recovery in Macau, they believe the group will also benefit; at the same time, the development of "Grand Lisboa Palace" will enhance the group's long-term growth and competitive advantage. The bank continues to be optimistic about the future development of the Macau gaming industry. The target price is 2.9 Hong Kong dollars. The main points of FIRST SHANGHAI are as follows: Performance review in the second quarter of 2024: Gross gaming revenue of SJM increased by 0.1% quarter-on-quarter to 6.89 billion Hong Kong dollars (recovered to 69.9% of the same period in 2019). VIP gaming revenue, mass market gaming revenue, and slot machine revenue increased by -17.5%, 1.1%, and 2.6% respectively (recovered to 15.1%, 95.3%, 136.3% of the same period in 2019); Non-gaming revenue decreased by 1.8% quarter-on-quarter (accounting for 6.5% of total revenue). EBITDA increased by 0.8% quarter-on-quarter to 870 million Hong Kong dollars (recovered to 86.8% of the same period in 2019). Including the expenses of satellite casinos, EBITDA was 930 million Hong Kong dollars (recovered to 92.4% of the same period in 2019). The net loss was 890 million Hong Kong dollars. Performance of "Grand Lisboa Palace" and other casinos: Gaming revenue of "Grand Lisboa Palace", other self-operated casinos, and satellite casinos increased by -5.0%, 0.1%, and -0.1% quarter-on-quarter to 1.78 billion, 1.26 billion, and 2.64 billion Hong Kong dollars respectively (recovered to 53.5%, 81.0%, 51.6% of the same period in 2019); their respective EBITDA were 480 million, 320 million, and 20 million Hong Kong dollars (recovered to 80.8%, 94.1%, 12.4% of the same period in 2019). The EBITDA of satellite casinos has turned from loss to profit. "Grand Lisboa Palace" also reopened its VIP room on the 36th floor, and will increase dining, retail, and hotel facilities. Performance of "Grand Lisboa": "Grand Lisboa" recorded revenue of 1.54 billion Hong Kong dollars (gaming revenue was 124 million - 68% from "Grand Lisboa Palace", non-gaming revenue was 324 million), an increase of 9.3% quarter-on-quarter. EBITDA increased by 17.2% quarter-on-quarter to 104 million Hong Kong dollars. Daily operating expenses increased by 5.8% quarter-on-quarter to 7.0 million Hong Kong dollars. "Grand Lisboa" has a market share of approximately 2.2%. The multi-function venue is under construction and is expected to be launched in the first half of next year. Other points: It is understood that in July-August, the group's market share further increased to 13.5%; and the market share of "Grand Lisboa" also increased to 2.5%. Foot traffic at "Grand Lisboa" increased by 22% quarter-on-quarter, mainly driven by mass market. There is currently no visible impact from the distribution of funds. The group has hired approximately 126 VIP customer service personnel and 69 promotional staff. Important risks: 1) Economic growth worse than expected, 2) Policy risks, 3) Performance of "Grand Lisboa" below expectations, 4) Market competition.