Fitch downgrades SJM Holding

The ratings agency has updated the company’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from stable to negative.

Macau.- Credit ratings agency Fitch has revised the outlook for SJM Holdings’ Long-Term Foreign-Currency Issuer Default Rating (IDR) from stable to negative due to uncertainty about how the casino operator will reduce its debt. It’s affirmed a ‘BB-‘ IDR and senior unsecured rating and a ‘BB-‘ rating for the outstanding notes of subsidiary, Champion Path Holdings Limited.

According to SJM’s latest financial report, the Grand Lisboa Palace (GLP) resort is not increasing its earnings and cash flow as quickly as expected, Fitch says. It said that if operations weaken further, it may lead to a lower rating.

Fitch expects SJM’s EBITDA leverage to increase to over 8x this year, before gradually falling to below 5x in 2027. Analysts said: “We believe SJMH 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 GLP and the impact of its satellite casino closures and restructuring.”

In August, the casino operator posted a loss of HK$182m (US$23.4m) for the first half of the year, compared to HK$162m (US$20.8m) a year earlier. Gross gaming revenue (GGR) was up 7.5 per cent year-on-year at HK$14.8bn (US$1.9bn). EBITDA fell by 5.1 per cent year-on-year to HK$1.65bn (US$212m) while EBITDA margin declined by 1.4 points to 11.2 per cent.

According to Fitch, SJM posted “weak results” due to unfavourable VIP hold rates affecting profits. Analysts said: “GLP’s revenue growth of 1 per cent in quarter-on-quarter terms and EBITDA margin of 3 per cent in the second quarter of 2025 were both below expectations even on a luck-adjusted basis.” They added that the company “lost market share to competitors’ newly opened hotels and intensified promotional activities.”

Analysts also said: “GLP also recorded a significant increase in operating expenses during the quarter, mainly due to increased marketing expenses. This, along with stagnant revenue growth, led to margin contraction. The company continues to work on various initiatives to improve GLP’s mass appeal through better connectivity, food and beverage, and retail and event offerings, but its effectiveness in increasing market share remains uncertain.”

Fitch noted that the company will reallocate gaming resources upon the closure of its satellite casinos by the end of the year, including around 458 tables and over 4,000 staff, to its self-owned casinos. SJMH is acquiring more gaming space at Casino Lisboa from its parent company, Sociedade de Turismo e Diversões de Macau SA (STDM). It also plans to acquire the properties where Casino L’Arc Macau and Casino Ponte 16 are located, allowing these casinos to operate under SJMH with more tables.

“The impact on SJMH’s 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,” Fitch said. Its base case assumes that SJMH 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. Such tables should generate higher margins than the previous satellite operations, leading to EBITDA accretion.”

The analysts said they expect remaining bond maturities can be covered by drawing down on aa HK$3.1bn undrawn revolver. 

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See also: SJM Holdings reports revenue growth in H1

The ratings agency has updated the company’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from stable to negative. Macau.- Credit ratings agency Fitch has revised the outlook for SJM Holdings’ Long-Term Foreign-Currency Issuer…