SJM Holdings costs to increase after absorption of satellite casino workers

According to Fitch Ratings, SJM Holding staff costs could increase by up to HK$600m(US$76.4m) after it absorbs workers affected by the closure of satellite casinos linked to the company.

Macau.- Fitch Ratings has downgraded SJM Holdings Limited’s Long-Term Foreign-Currency Issuer Default Rating from “BB” to “BB-” due to uncertainty regarding SJM’s capacity to return to 2019 levels. According to analysts, SJM Holdings could see its staff costs increase by up to HK$600m(US$76.4m) due to its decision to rehire employees who may be affected by the closure of satellite casinos linked to the company.

SJM Holdings Ltd has announced its purchase of the Oceanus property where the group currently operates the Oceanus casino but Fitch said there could be limited risk of further large acquisitions of third-party owned, self-operated casinos.  

The casino operator has renewed its service agreement with Emperor Entertainment Hotel Limited, which will operate the satellite casino located in Macau’s Grand Emperor Hotel for another six months.

For the first quarter of the year, SJM Holdings posted a loss of HK$1.28bn (US$163.4m). Gross gambling revenue for the quarter fell 4.2 per cent year-on-year to HK$2.54bn. Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) came in at a negative HK$474m.

In May, analysts at Moody’s also cut SJM Holdings’ debt rating. The casino operator’s corporate family rating has been cut from Ba3 to Ba2. Both ratings are considered non-investment grade, with speculative elements and substantial credit risk.

“The downgrade is mainly driven by the slower recovery prospects for SJM’s gaming revenue during 2022-23 than we previously expected,” said Sean Hwang, Moody’s assistant vice president and analyst, in a press release on the rating change.