SJM Holdings earnings to improve, analysts say

SJM Holdings' recovery will be fueled by Grand Lisboa Palace.
SJM Holdings' recovery will be fueled by Grand Lisboa Palace.

Moody’s Investors Service has predicted that SJM Holdings’ performance will improve over the next two to three years thanks to Grand Lisboa Palace and Macau’s expected recovery.

Macau.- Analysts at Moody’s Investor Services have predicted that based on the expected Macau market recovery and the growth of the Grand Lisboa, SJM Holdings Ltd.’s earnings will improve in the next two to three years. The recovery will lead to an improvement in EBITDA “from a negative level in 2021 to approximately 8.5 times in 2022 and 3.2 times in 2023.”

The grand opening of Grand Lisboa Palace Phase I took place on July 30, with SJM allocating the venue 118 gaming tables from other properties. When complete, the venue will have around 2,000 hotel rooms split between three venues: The Lisboa Palace Hotel, Palazzo Versace Macau, and Karl Lagerfeld Hotel luxury boutique hotel.

It will have 27,000 square metres of gaming floor space (290,000 sq ft) for up to 700 gaming tables and 1,200 electronic gaming machines.

Moody’s said: “The expected ramp-up of Grand Lisboa Palace since its opening in July 2021 will allow SJM Holdings to gain market share by building a significant presence in Cotai.”

According to Moody’s, Grand Lisboa’s GGR will reach HK$16bn in 2023 while property EBITDA will be nearly HK$2.5bn, accounting for approximately 40 per cent to 50 per cent of the group’s total EBITDA in 2023.

Analysts have previously said Macau’s economy could return to pre-pandemic levels by 2024. Moody’s has given Macau an Aa3 rating, however it said: “The growth volatility of Macau’s economy is among the highest of all rated sovereigns.

“But despite the highly volatile nature of economic growth, Macao’s vast fiscal and external reserves — significantly stronger than those of similarly rated peers — and very high per capita incomes continue to support its credit profile.”

Moody’s to review SJM Holdings’ rating after refinancing delay

SJM Holdings Limited has been placed on review for downgrade by Moody’s Investors Service mainly due to a delay in refinancing its existing bank loans, which will mature at the end of February 2022.

Moody’s will review SJM Holdings Limited’s Ba1 corporate family rating (CFR) and the Ba2 backed senior unsecured rating on the bond issued by Champion Path Holdings Limited and guaranteed by SJM Holdings Limited.

Sean Hwang, Moody’s assistant vice president and analyst, said: “While SJM’s solid credit quality and long-standing banking relationships support its ability to raise necessary funds, its funding plan is subject to certain regulatory processes and capital market uncertainties.”

If SJM fails to make sufficient progress on the maturity of bank loans in the next three months or so, Moody’s will downgrade its rating, possibly by multiple ratings.

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