Fitch Ratings Inc says it expects SJM Holdings Ltd’s earnings before interest, taxation, depreciation, and amortisation (EBITDA) leverage to increase to over 8.0 times in 2025, up from 7.0 times last year. Such EBITDA leverage will “gradually” fall to below 5.0 times in 2027, suggested the rating agency in a Friday report.
In the memo, Fitch said it had revised the outlook on SJM Holdings’ long-term foreign-currency issuer default rating to ‘negative’ from ‘stable’, and affirmed the firm’s rating at ‘BB-‘.
“The negative outlook reflects heightened uncertainty around SJM Holdings’ deleveraging trajectory, as recent results indicate slowing EBITDA and cash flow improvement from the Grand Lisboa Palace resort [pictured],” wrote analysts Samuel Hui, Rebecca Tang, and Tyran Kam.
They added: “Fitch still expects SJM Holdings’ leverage metrics to improve to within the ‘BB-‘ threshold over the forecast period, but any further operational weakness could lead to negative rating action.”
In late August, the Macau casino concessionaire reported group-wide revenue of nearly HKD14.64 billion (US$1.88 billion) for the first six months this year, up 6.1 percent from a year earlier.
The company posted a first-half loss of HKD182.2 million for the first half of 2025, compared with a HKD162.4-million loss in the prior-year period.
SJM Holdings’ adjusted EBITDA fell by 5.1 percent year-on-year, to just under HKD1.65 billion in the six months to June 30 this year.
In Friday’s memo, the Fitch analysts said they believed SJM Holdings “remains on a deleveraging path” in the medium term, with improvement in free cash flow and a focus on debt reduction.
“However, the deleveraging trajectory has been delayed compared with our previous expectations, and uncertainty remains over the ramp-up of Grand Lisboa Palace and the impact of its satellite casino closures and restructuring,” they stated.
The institution noted that the casino firm’s “weak” second-quarter 2025 results “were partly due to unfavourable VIP hold rates affecting profits”.
The Fitch team added: “But Grand Lisboa Palace’s revenue growth of 1 percent quarter-on-quarter and EBITDA margin of 3 percent in second-quarter 2025 were both below expectations even on a luck-adjusted basis.”
Declining market share, satellite woes
The rating agency suggested SJM Holdings “lost market share to [Macau market] competitors’ newly opened hotels and intensified promotional activities”.
“Grand Lisboa Palace also recorded a significant increase in operating expenses during the [second] quarter, mainly due to increased marketing expenses,” observed the analysts.
They added: “This, along with stagnant revenue growth, led to margin contraction. The company continues to work on various initiatives to improve Grand Lisboa Palace’s mass appeal through better connectivity, food and beverage, and retail and event offerings, but its effectiveness in increasing market share remains uncertain.”
In June, SJM Holdings said it will cease operating seven of its current nine satellite casinos this year, with one shuttered at the end of July. Only Ponte 16 and L’Arc Macau are expected to continue operations beyond 2025, with the SJM group having previously announced plans for them to become part of the group’s portfolio of self-promoted operations.
According to Fitch, SJM Holdings “will reallocate gaming resources upon the closure of its satellite casinos”, including “around 458 tables and over 4,000 staff, to its self-owned [gaming venues]”.
As part of the process, the casino operator is acquiring a portion of Hotel Lisboa, in downtown Macau, from its parent, Sociedade de Turismo e Diversões de Macau SA (STDM). The deal involves a total consideration of HKD529 million.
“The impact on SJM Holdings’ credit profile will depend on its ability to recapture the market share of the outgoing satellite casinos, as well as the terms of the acquisitions,” said the Fitch analysts.
“Fitch’s base case assumes that SJM Holdings will retain two-thirds of the outgoing satellite casinos’ market share, with tables reallocated to its properties on the peninsula, given their proximity and similar positioning,” they stated.
“Such tables should generate higher margins than the previous satellite operations, leading to EBITDA accretion,” the analysts added.
The rating agency also said it expects SJM Holdings to be “able to secure new bank loans to refinance the majority of its US$500 million bond maturing in January 2026”.
“The remaining bond maturities can be covered by drawing down on its HKD3.1 billion undrawn revolver as of end of the first-half of 2025,” it added.
