SJM Holdings to generate positive cash flow this year, analysts say

Lucror Analytics highlighted a recent strategic asset purchase.

Macau.-Lucror Analytics credit analyst Leonard Law has indicated that SJM Holding’s credit outlook is “stable” and that he expects the casino operator to achieve modest positive free cash flow this year, which should help gradually reduce its net debt.

According to Law, several factors support this, including the recent strategic acquisition of Kam Pek Community Centre, NYH European and NYH Italian from Sociedade de Turismo e Diversões de Macau and the fact that SJM Holdings’ unrestricted cash and undrawn credit facilities are sufficient to meet its debt obligations until at least 2026.

Despite this, the company still faces some near-term financial challenges. Law said SJM Holdings’ profitability is expected to lag behind its peers for the next one to two years due to the costs associated with retaining excess gaming staff from former satellite casinos, an issue unlikely to be fully resolved before 2025, and the slow ramp-up of Grand Lisboa Palace.

For the first quarter of the year, SJM Holdings posted gross gaming revenue (GGR) of HK$6.46bn (US$827m) and a narrowed loss attributable to owners of HK$74m (US$9.5m). Net gaming revenue was up 74.5 per cent year-on-year to HK$6.46bn (US$827m). Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) came in at HK$864m (US$110.5m), compared with HK$31m (US$4m) in the same period last year.

As of the end of March, SJM Holdings had approximately HK$28.49bn in debt, based on unaudited first-quarter results. The company’s syndicated bank facilities, which include a HK$9bn term loan and a HK$10bn revolving credit facility, had HK$2.7bn remaining undrawn.