Fitch Upgrades SJM Holdings Outlook to "Stable" Amid Macau Success

In a remarkable turn of events, Fitch Ratings has revised its outlook for SJM Holdings, a prominent player in the casino industry. The rating agency, which previously had a "negative" outlook, has now shifted it to "stable." This change comes on the back of Fitch's anticipation that SJM will achieve positive free cash flow in 2024.

The positive outlook is attributed to the expected growth of SJM Holdings, accompanied by a reduction in its debt balance. Fitch predicts that SJM will reach an impressive HK$6.6 billion in EBITDA by 2026. This optimistic outlook is closely linked to Macau's continual rise in visitation and gaming revenue.

However, Fitch has highlighted certain challenges that may restrict SJM's ratings. These include high leverage resulting from the accumulated debt due to the Covid-19 pandemic and substantial investments in the Grand Lisboa Palace resort in Macau. Additionally, regulatory concerns in Macau, economic challenges in China, and fierce competition in the Macau market pose potential risks.

Despite a challenging end to 2022 with the closure of seven casinos, SJM made a remarkable comeback in 2023 as Covid-19 restrictions eased in Macau. The first half of 2023 witnessed positive EBITDA, a 126.7% surge in total revenue compared to the previous year, and substantial increases in net gaming revenue and gross gaming revenue.

Macau's gaming sector continues to flourish, even in the face of China's economic struggles. In December, Macau achieved a monthly gross income of MOP18.6 billion, marking a staggering 433% year-on-year increase. This impressive growth contrasts with China's declining lottery ticket sales and sports lottery sales.

The upgrade in SJM Holdings' outlook indicates a promising future for the company amidst Macau's ongoing success in the gaming sector. Despite challenges and uncertainties, Macau remains a resilient gambling hub, outperforming expectations and setting new records in revenue generation.