<Research Report>SJM HOLDINGS (00880) target cut to $21 by JPM as higher expenses pressure margin

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SJM HOLDINGS (00880) target cut to $21 by JPM as higher expenses pressure margin

2012-08-09 11:57:59

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SJM HOLDINGS (00880)'s 2Q revenue declined 2%, matching with the broad sector, while the EBITDA margin stayed flat at 9.8% in the previous quarter, mainly due to the increase in the earnings of the highly profitable Grand Lisboa Hotel, JP Morgan said in a report. However, due to the increase in promotional costs or intermediaries commission, the other casinos' margins declined. The Bank lowered the earning forecast for gaming stocks in 2012 from 24% to 14%. The target price of SJM was reduced from $22.3 to $21.

The Group's net cash amounted to $18 billion, the Bank expected the high payout ratio can be maintained at near 70%. The rating is remained at Overweight.

However, the Bank is more bullish on MGM CHINA (02282), with Overweight rating, on low valuation and similar dividend payout ratio, but with more room for profit and margin growth. (r)

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