SJM Holdings, the Macau on line casino empire based by the late playing tycoon Stanley Ho, is burning by means of its money reserves because the Chinese territory tightens a zero-Covid regime that has already despatched playing revenues plunging.
Macau started mass coronavirus testing on Sunday to comprise its worst outbreak but, prompting falls in Hong Kong-listed on line casino shares together with SJM, which ended on Monday down 3.2 per cent.
Analysts have highlighted issues concerning the money accessible to SJM. JPMorgan mentioned in a word on Sunday that SJM’s liquidity could be sufficient to maintain it till March subsequent 12 months if it was not in a position to generate any revenues, the shortest interval amongst Macau’s massive on line casino operations.
Total gross gaming revenues in Macau had been simply $413mn final month, an almost 90 per cent drop from pre-pandemic ranges. With dozens of Covid infections reported over the weekend — probably the most within the former Portuguese colony for the reason that begin of the pandemic — analysts mentioned casinos’ revenues had been more likely to fall to “near-zero levels”.
Macau, which is following the zero-Covid coverage set by President Xi Jinping on the Chinese mainland, suspended college courses on Sunday and urged eating places to halt dine-in companies. Shares in native on line casino operator Wynn Macau fell 3.4 per cent, whereas rivals MGM China and Sands China each dropped 2.2 per cent.
Last week, score company Fitch downgraded SJM’s senior unsecured debt from double B to double B minus, citing “reduced confidence in the recovery of Macau’s gaming industry”.
“SJM remains our least preferred name within Macau,” JPMorgan analyst DS Kim wrote in a word final week that was issued after the group introduced the approval by authorities and banks of a HK$19bn (US$2.4bn) mortgage refinancing deal.
SJM would have an estimated $710mn in money liquidity accessible by mid-2022, based on JPMorgan, that means it might final roughly 9 months with zero revenues and month-to-month spending of $80mn to maintain its operations.
Sands China, with estimated liquidity of $1.6bn, might additionally solely keep spending till March subsequent 12 months given month-to-month money burn of $168mn, JPMorgan mentioned. It mentioned different operators akin to Wynn, MGM and Melco had liquidity sufficient to maintain them till no less than mid-2024 even with zero income.
SJM founder Ho, who dominated playing in Macau for many years, died in 2020. The group is headed by Daisy Ho, a daughter of the late patriarch.
The firm introduced final month it will purchase the Casino Oceanus from the group’s primary shareholder Sociedade de Turismo e Diversões de Macau, paid for with HK$1.9bn (US$242mn) in new convertible bonds. JPMorgan analysts mentioned in one other word they did “not like the timing” of the transfer, which got here as the corporate was struggling “severely from a liquidity strain”.
Hoffman Ma, an govt at Success Universe, which has invested in SJM’s Ponte 16 resort, mentioned he believed there have been solely “limited worries” concerning the on line casino operator following the approval of its latest mortgage refinancing. But Ma mentioned the Covid outbreak nonetheless posed dangers for the gaming business.
“We can forget about any [revenue growth] for June with at least half of this month’s revenue expected to disappear,” he mentioned. “We will also need to observe how quick the revenue rebound would be after the pandemic gets under control.”
Asked about its money liquidity, SJM declined to remark apart from reiterating information of its mortgage refinancing.
Casino operators are additionally bracing for the Macau legislature’s anticipated approval on Tuesday of a revised gaming regulation that will increase authorities scrutiny and imposes extra stringent monetary necessities.
Additional reporting by Primrose Riordan in Hong Kong
