The plan by Macau casino concessionaire SJM Holdings Ltd to acquire the properties of Casino L’Arc Macau and Casino Ponte 16, and to discontinue its remaining satellite casinos is “unlikely to significantly impact SJM’s credit profile,” says Fitch Ratings Inc.
Macau currently has 11 satellite casinos operating under the 10-year gaming concessions that began in January 2023. Nine of the 11 are run via SJM Holdings’ licence; one under Galaxy Entertainment Ltd’s permit; and one via Melco Resorts & Entertainment Ltd’s gaming rights.
Under the city’s revamped gaming regulatory framework – coinciding with the current concessions of the six Macau operators – from next year, the third-party investors in satellite casinos will only be permitted to earn a “management fee” via a “management company”.
On June 9, SJM Holdings announced plans to close seven of its satellite casinos by year-end. Only Ponte 16 and L’Arc Macau (pictured in a file photo) are expected to continue operations beyond 2025.
To that end, the casino firm announced plans to acquire the respective properties where those two casinos are located, meaning they would become self-promoted casinos. The move still requires approval from the Macau government.
SJM Holdings is already a 51-percent joint venture partner – with Hong Kong-listed Success Universe Group Ltd, which holds the remaining 49 percent – in Ponte 16, a property in Macau’s Inner Harbour district. L’Arc Macau (pictured), also on the Macau peninsula, is linked to interests represented by Angela Leong On Kei, co-chairman and executive director of SJM Holdings.
“Fitch believes the potential debt-funded acquisitions could have a moderate negative impact on SJM’s leverage profile, as the additional debt would be partially offset by additional EBITDA [earnings before interest, taxation, depreciation, and amortisation] from continuing to operate the casinos at the two properties,” stated the rating agency in a Sunday memo.
“However, we expect the impact to be manageable and we continue to expect SJM’s EBITDA net leverage to decline to below 5 times, our negative rating sensitivity, in 2027,” it added.
In December last year, Fitch affirmed SJM Holdings’s long-term foreign-currency issuer default rating at ‘BB-‘, with a ‘stable’ outlook.
Fitch estimates that the SJM group “may reallocate around 300 tables and 4,000 members of staff from the satellite casinos to its self-operated casinos, such as Grand Lisboa Palace, which has the capacity for over 300 tables, compared with about 210 in operation”.
It further stated: “The EBITDA impact will be subject to SJM’s ability to capture market share with the additional tables at its self-operated casinos. In our rating case, we assume the company will gain sufficient market share, such that the EBITDA impact from the satellite casino closures is broadly neutral.”
Though banking group Morgan Stanley said in a June 10 note: “Gross gaming revenue from SJM satellite casinos of HKD2.8 billion [US$356.7 million] in first quarter 2025 (5 percent of the industry) could leak to other [Macau] peninsula casinos.”
Morgan Stanley mentioned the MGM Macau property, run by MGM China Holdings Ltd; and Starworld Hotel, under Galaxy Entertainment; as well as to SJM Holdings’ downtown properties, Grand Lisboa, and Lisboa.
