SJM Holdings Ltd. (880), the Macau casino operator founded by billionaire Stanley Ho, won a land grant that paves the way for the company to build its first hotel- casino in the Chinese city’s Cotai area.
SJM, which operates 20 of Macau’s 35 casinos, agreed to pay the Macau government 2.15 billion patacas ($269 million) for the land, according to a Hong Kong Stock Exchange filing late yesterday. It will apply to operate about 700 gambling tables, 1,000 slot machines and 2,000 hotel rooms on the site,
The deal will give SJM a foothold in Macau’s popular Cotai strip. The grant in the area is the second in two days, with MGM China Holdings Ltd. (2282), a venture between Stanley Ho’s daughter Pansy Ho and MGM Resorts International (MGM), getting approval on Oct. 18 for a $2.6 billion resort. Macau is the world’s largest casino market and the only city in China where table games and slots are legal.
“SJM’s acceptance of the proposed draft land concession contract is a milestone development for the company as it offers the opportunity for the group to expand its existing operations from the Macau Peninsula to Cotai,” Chief Executive Officer Ambrose So said in an e-mailed press release.
SJM gained 2.5 percent to HK$17 yesterday in Hong Kong, before the announcement. The stock has gained 34 percent this year, double the 17 percent rise in the city’s benchmark Hang Seng Index.
SJM is the fifth company this year to receive a go-ahead to expand on the Cotai strip, a piece of reclaimed land that is Asia’s equivalent to the Las Vegas Strip. MGM China, Wynn Macau Ltd., Melco Crown Entertainment Ltd. (6883) and Galaxy Entertainment Group Ltd. (27) have already won approvals.
John Kempf, an analyst who follows the Macau casino market for RBC Capital Markets, said the government may try to delay a couple until 2017, since all six license holders have plans to open resorts in 2015 and 2016.
“While the amount of supply in such a short period is staggering, the Macau hotel room base will grow by approximately 50 percent, which should drive visitation and length of stay,” he said in an e-mail.
Sands China Ltd. (1928) is also expanding Cotai facilities that combine hotels and casinos to draw so-called mass-market gamblers, who provide wider margins than “VIP” visitors.
SJM plans to start construction after Macau publishes the land contract in the city’s Official Gazette, and expects work to last as long as 36 months, according to the release.
The company plans to develop as much as 521,435 square meters (5.61 million square feet) of total floor area on the 70,468-square-meter site near the intersection of Avenida do Aeroporto and Rua de Tenis, according to the exchange filing.
Macau is granting on the land on a renewable 25-year lease, and SJM can pay in installments, according to the filing.
The company didn’t disclose its expected total investment in the press release or exchange filing and Janet Wong, an SJM spokeswoman, didn’t immediately return phone calls or e-mails seeking comment.
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