Galaxy & SJM EBITDA margins tell two different stories

June 7, 2022 Macau Earnings & Filings Industry Updates

By examining the EBITDA margins of Macau’s six gaming concessionaires from the start of 2021 to the end of 1Q22, we take a glimpse at how operators have adapted (or not) to an industry that continues to be gripped by the pandemic and related border closures.

The EBITDA margin is a measure of a company’s operating profit as a percentage of its revenue. The metric is considered to be a good indicator of a company’s financial condition as it allows for the comparison of one company’s real performance relative to others in its industry.

If a company has a higher EBITDA margin, that means it’s operating efficiently, with operating expenses kept low in relation to its total revenue. On the other hand, a company with a low, or negative EBITDA margin means that a company could be facing more operational difficulties.

Looking at the infographic, we see two stand out companies – Galaxy Entertainment Group and SJM Holdings, which are at opposite ends of the graph.

Galaxy’s mass strength pays dividends
Galaxy Entertainment Group has consistently performed above its Macau peers, including several quarters in 2021 and 2022 that beat analyst expectations.

Earlier this year, Galaxy Entertainment Group became the first Macau operator to resume dividends after announcing a return to profit in 2021. At the time, J.P Morgan analyst DS Kim said the decision was a good gesture and reflected the strength of its balance sheet.

Last year, Morgan Stanley analysts noted that Galaxy has consistently outperformed its Macau peers on several key parameters including EBITDA, free cash flow, market share, cost reductions, net debt, interest expense and bad debt provisions from as early as 2020.

In 1Q22, the company again beat expectations due to strong retail and solid premium mass business in the quarter. Bernstein added that mass gaming performance had been “solid in a weak market”, with the higher-margin mass making up for 83 percent of total revenue.