SJM Slightly Plus Cash Flow in 2024

SJM Slightly Plus Cash Flow in 2024

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Macau casino operator SJM Holdings Ltd may start generating "slightly positive" cash flow this fiscal year, says Singapore-based Lucror Analytics.

"Our underlying credit bias against SJM [Holdings] is 'stable,'" said credit analyst Leonard Law. "We expect the company to generate some positive free cash flow in 2024, driving a gradual decline in net debt."

Unaudited first-quarter results showed SJM had nearly 28.49 billion Hong Kong dollars ($3.64 billion) in debt as of the end of March. Of the company's syndicated banking facilities, about 9 billion Hong Kong dollars in regular loans and about 10 billion Hong Kong dollars in revolving credit facilities, 2.7 billion Hong Kong dollars were not withdrawn as of the end of March.

Lucro said the factors underpinning SJM Holdings' move toward positive cash flow included the strategic acquisition of a number of assets from its recently announced parent company, privately owned Sociedad de Turismo Diver o ̃ de Macau SA (STDM), compared with SJM's HK$4.95 billion cash balance as of the end of March.

The casino company said its acquired STDM assets, including a building in downtown Macau that will turn into a food center for tourists and an STDM control company involved in the planned food and beverage business at Kotai flagship resort Grand Lisboa Palace (pictured), will help SJM Holdings build its business with tourists to the popular market.

Lucror said SJM Holdings' unrestricted cash and undrawn credit facilities would be "enough" to meet all debt obligations through at least fiscal 2026.

Still, casino operators faced "limited" short-term financing risks, Lucror noted.

Mr Law also cited several legacy issues related to SJM Holdings' obligations to employees at its former satellite casino, which relied on Macau gaming rights, saying, "The company's profitability will lag behind its peers over the next year or two. That's because while the expansion of Grand Lisboa Palace remains tepid, the costs associated with including excess gaming employees in payroll are unlikely to be fully addressed by 2025."

The analyst added: "This means SJM's deleveraging rate may be slower than peers."

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