Amid a robust recovery phase post-COVID, SJM Resorts S.A., a prominent Macau concessionaire, has announced significant revisions and extensions in its business agreements. These strategic moves reflect the company’s confidence in the rebounding market dynamics and its commitment to optimizing operational efficiencies.
Enhanced Investment in L’Arc:
SJM Resorts S.A. has opted for substantial upward revisions in its payment caps to the operating entity of the satellite casino L’Arc. This revision, coupled with a lease extension of Jai Alai, signifies a bullish outlook on Macau’s gaming and hospitality sector.
Revised Payment Caps:
Under the revised agreements, SJM Resorts S.A. has doubled the annual cap payable to L’Arc Entertainment for services rendered and utilization of the hotel and casino areas. The cap for FY24 has surged to HK$908.3 million (US$116 million) from HK$351.7 million (US$45 million), while FY25’s cap has increased to HK$960 million (US$123 million) from HK$450.1 million (US$58 million).
Justification for the Revision:
The decision to escalate payment caps stems from the escalating payments under the existing L’Arc Services Agreement. With payments reaching HK$157.4 million (US$20 million) in 1Q24, nearly 45% of the existing full-year cap, SJM Resorts S.A. anticipates further growth in gross gaming revenue and visitor arrivals in Macau. This optimism is particularly fueled by expected expansions during holiday seasons.
Lease Extension of Jai Alai:
In a separate but complementary move, SJM Resorts S.A. has secured a three-year lease extension for the entire Jai Alai building, aimed at housing Casino Oceanus and other auxiliary facilities. The lease agreement, effective from April 1, 2024, reflects an astute business strategy to capitalize on the burgeoning demand for gaming and hospitality offerings.
Lease Agreement Details:
The lease agreement with Macau Jai Alai, predominantly owned by Angela Leong, involves incremental monthly rents over the three-year period. Starting at HK$3.5 million (US$447,630) in the first year, the rent progressively rises to HK$4 million (US$511,580) in the second and HK$4.5 million (US$575,525) in the third. This structured approach aligns with the anticipated growth trajectory of Macau’s tourism and gaming industry.
Business Performance and Recovery Trends:
SJM Resorts S.A.’s strategic maneuvers come on the heels of steady recovery in its business operations. Notably, the company reported a remarkable 77% year-on-year increase in Gross Gaming Revenue (GGR) in Q1, amounting to HK$6.89 billion (US$881 million). These encouraging figures underscore the resilience and adaptability of Macau’s gaming sector amidst challenging global circumstances.
SJM Resorts S.A.’s proactive measures underscore its commitment to harnessing the burgeoning opportunities in Macau’s post-pandemic landscape. By revising payment caps, extending lease agreements, and capitalizing on recovery trends, the company is poised to strengthen its foothold in the region’s thriving gaming and hospitality industry. As Macau continues its trajectory towards economic revival, SJM Resorts S.A. stands at the forefront, leveraging strategic investments to navigate the evolving business landscape with agility and foresight.