SJM Holdings earnings to rise amid Macau recovery, analysts say

Moody’s expects SJM’s adjusted EBITDA to reach HK$1bn (US$127m) in 2023 and HK$4bn in 2024.

Macau.- SJM Holdings will see a boost in earnings over the next two years as Macau’s gaming market continues to recover from the Covid-19 pandemic. According to a report by credit rating agency Moody’s Investors Service, SJM’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) will reach HK$1bn (US$127m) and HK$4bn in 2023 and 2024, respectively, a sharp turnaround from its HK$3bn loss in 2022.

Moody’s vice president Gloria Tsuen attributed the anticipated growth to the removal of pandemic-related travel restrictions in early January. This policy change led to an immediate growth in visitor numbers in Macau and a significant uptick in gross gaming revenue. 

In February, Macau’s casinos reported MOP10.32bn (US$1.27bn) in gross gaming revenue. That’s an increase of 33.1 per cent year-on-year but down 11 per cent when compared to January. The accumulated result of MOP21.9bn since the start of the year is already over half of what the city reached in total last year.

SJM’s financial leverage is expected to continue improving over the next 12 to 18 months with the recovery still in its early stages. Tsuen said the gaming operator will need time to rebuild its capital structure after the pandemic.

Moody’s estimates are based on the assumption that Macau’s mass-market casino revenue will return to around 75 per cent of its 2019 levels in 2023 before achieving full recovery next year. The VIP segment’s gross gaming revenue is predicted to remain weak due to regulatory restrictions on junket operations, which previously drove the VIP business.

The opening of SJM’s new Grand Lisboa Palace (GLP) project in Cotai this year is expected to further increase the company’s earnings. A soft opening for the last of the three hotels that make up SJM’s Cotai property is scheduled for sometime next month, according to chairwoman Daisy Ho.

SJM’s liquidity, comprising cash and availability under the revolver, totalled around HK$7bn as of the end of 2022, which is expected to be sufficient to cover the company’s cash needs for at least the next 12 months, including construction and other payables due during this period.

SJM Holdings reported net gaming revenue was HK$6.1bn (US$780m) in 2022, down by 36 per cent compared to a year earlier. The group’s EBITDA was negative HK$3.1m (US$394.3m), compared with negative HK$1.58m for 2021.