Grand Lisboa Palace Cotai Faces New Delays as Construction Costs Rise

Posted on: July 31, 2019, 04:56h. 

Last updated on: July 31, 2019, 09:59h.

SJM Holdings Ltd. has once again postponed the opening of the Grand Lisboa Palace — the company’s first integrated resort on China’s Cotai strip — to sometime in the second half of 2020.

Construction was underway at Cotai’s Grand Lisboa Palace in late 2017. Continuing construction delays have led the SJM Holdings Ltd. venue to delay the opening until the second half of 2020. (Billy H.C. Kwok/Bloomberg)

The venue was supposed to open by the end of this year. But construction is now expected to be completed in March 2020 rather than the earlier deadline of next month.

Notice about the delay was announced this week by SJM so lenders can approve the new timeframe. In April 2018, SJM Holdings also delayed the opening date, according to a memo from analysts at Macquarie Capital Ltd.

The cause of delaying the opening back then from 2018 to 2019 was blamed on Typhoon Hato hitting the region in 2017 and an unrelated fire on the construction site, the memo explained. The cause of the most recent delay is unclear.

Once open, the HKD$39 billion (US$4.98 billion) Grand Lisboa Palace will include some 2,000 hotel rooms and suites divided among different hotels, space for meetings and conferences, restaurants, entertainment space, and a casino. The casino floor will accommodate up to 700 tables and 1,200 slot machines.

The construction cost for the property has increased by 8.3 percent from HKD36-billion (about $4.6 billion), SJM Holdings announced in a recent statement. In 2014, the company upped construction costs from HKD$25 billion (US$3.19 billion) to HKD$30 billion (US$3.83 billion).

That earlier increase was blamed on increasing construction and labor costs, according to the South China Morning Post.

SJM Holdings will try to finish construction on the venue by August or September 2019. It will take an additional year “to get necessary inspection and approvals for hotel/casino operations,” JP Morgan Securities (Asia-Pacific) Ltd. analysts said in a memo released on Tuesday quoted by GGRAsia.

JP Morgan said the postponed opening was “not unexpected.” SJM said in a press release, it is “striving for construction to complete by the end of 2019 and to seek the relevant licenses to begin operation as soon as possible thereafter.”

The delay could impact the price of SJM shares. Macquarie analysts Edward Engel and Chad Benyon cautioned that if SJM delays the opening of the venue to year-end 2020, “we could see more weakness in the share price near term.

We view the pushed-back opening as a negative, as investors become frustrated with continued delays,” Macquarie analysts added. “Given the unspecified reason for the delay, investors may become cautious over potential construction issues that may increase the potential for further delays or imply faults with the final product.”

In May, SJM said in a statement the resort casino would be completed in August and would open by the end of this year. In June, Daisy Ho Chiu Fung, chairman of SJM Holdings, said construction of Grand Lisboa Palace was scheduled to be completed this year.

Macau Casino Licenses Extended

In March, Macau extended casino licenses for SJM Holdings until 2022. All six gaming concession licenses in Macau will expire in the summer of 2022.

Once the Grand Lisboa Palace opens, SJM expects it will help the company improve its market share. Brokerage Sanford C. Bernstein Ltd. had noted in a May memo that “over the past five years, SJM’s market share has fallen from over 23 percent to a historic low of 14 percent.”

Mixed Results for SJM

In results announced on Tuesday, SJM Holdings reported mass market gross table gaming revenue for the company and its subsidiaries increased by 8 percent and VIP gross gaming revenue (GGR) decreased by 25.1 percent during the first half of 2019 compared with the year-earlier period. Also, slot machine gross revenue decreased by 1.2 percent compared with the year-earlier period.