Fitch Ratings Inc has affirmed Macau casino business SJM Holdings Ltd’s long-term foreign-currency issuer default rating at “BB-”, described as a “speculative” rating, with a “stable” outlook.
In a Tuesday memo, the institution said nonetheless it expects a reduction in the firm’s leverage in coming years, relative to its HKD27-billion (US$3.48-billion) debt pile measured as of September 30 this year. That could come down to HKD22 billion – an 18.5 percent reduction – by the end of 2026, said the ratings agency.
The improvement would be driven by factors including growth of the group’s earnings before interest, taxation, depreciation and amortisation (EBITDA) amid the ramping up of operations at its Grand Lisboa Palace casino resort (pictured) in Cotai, stated Fitch.
The institution has also affirmed the group’s senior unsecured rating of ‘BB-‘, and the ‘BB-‘ rating on the outstanding notes issued by a subsidiary, Champion Path Holdings Ltd. The latter notes are rated at the same level as SJM Holdings’ senior unsecured rating.
Tuesday’s memo stated: “Fitch expects SJM Holdings to reduce its EBITDA leverage from 6.9 times in 2024, to 3.9 times in 2026, below our negative sensitivity of 5.0 times, as EBITDA continues to grow as Grand Lisboa Palace ramps up and debt reduces with free cash flow growth.”
Fitch added: “We expect the debt balance to decrease from HKD27 billion at end-September 2024, to HKD25 billion by end-2025 and HKD22 billion by end-2026.”
The memo added the casino firm was likely to “focus on deleveraging as it maintains a conservative financial policy”.
Grand Lisboa Palace opened in July 2021, amid the Covid-19 pandemic that saw tourism to Macau heavily disrupted. A number of commentators had said the resort had been slow to build up its business in the recovery period since travel rules eased in January 2023, though more recently it has seen improvement.
Fitch observed SJM Holdings’ ratings were “constrained by its high leverage, which was driven by debt built up for the Grand Lisboa Palace expansion and due to the Covid-19 pandemic”.
The institution added: “The ratings also reflect the uncertainty on the continued ramp-up of Grand Lisboa Palace amid a competitive environment in Macau, with new openings and expansion of existing casinos.”
Though it also stated the casino group has “a long history of operations in Macau, with a record of maintaining a conservative financial position.”
Brokerage CLSA Ltd said in a recent report, it expected SJM Holdings to be the only one of Macau’s six gaming operators that would not issue a dividend in 2025.
Nonetheless, the casino business does plan – according to a document said to be an internal memo – to pay in January a discretionary bonus to staff.
That was a “show of “gratitude” to the firm’s eligible employees for helping the company achieve “steady progress” in its business performance in 2024.
