In Macau and local casino operator SJM Holdings Limited is reportedly expected to generate approximately $257 million in aggregated annual earnings next year from its coming Grand Lisboa Palace development.

According to a report from Inside Asian Gaming, this forecast from American credit ratings behemoth Fitch Ratings Incorporated was included in an assessment that gave the Hong Kong-listed casino firm’s coming senior notes offering a ‘BB+’ default rating. The source detailed that this proposed fundraising exercise is to be run by SJM Holdings Limited’s wholly-owned Champion Path Holdings Limited subsidiary with any proceeds subsequently being used to help pay down a raft of general debt obligations.

Substantial stake:

SJM Holdings Limited is responsible for some 20 gambling-friendly enterprises spread across Macau and it reportedly began work on the $5 billion Grand Lisboa Palace project in February of 2014 so as to be better able to compete with nearby properties such as the $3.2 billion Studio City Macau from rival Melco Resorts and Entertainment Limited. The 1,900-room Cotai Strip property is now set to begin welcoming its first guests by the end of March with Fitch Ratings Incorporated purportedly forecasting that its 2023 earnings before, interest, tax, depreciation and amortization should subsequently top $450 million.

Reportedly read a statement from Fitch Ratings Incorporated…

“We believe Grand Lisboa Palace will allow SJM Holdings Limited to gain a foothold on the Cotai Strip and raise its market share. We forecast that Grand Lisboa Palace will have earnings before interest, tax, depreciation and amortization of $257.93 million with 330 tables by 2022 and $451.41 million with 380 tables by 2023, which will be partially offset by slightly lower earnings before interest, tax, depreciation and amortization at its existing properties due to table reallocation and business diverted to Grand Lisboa Palace.”

Convenient contrast:

By comparison and the ratings agency reportedly explained that the 1,700-room Wynn Palace Cotai venue from the Wynn Macau Limited subordinate of Wynn Resorts Limited premiered in August of 2016 and went on to chalk up 2019 earnings before interest, tax depreciation and amortization of just over $644.87 million from 325 gaming tables. Fitch Ratings Incorporated moreover purportedly pronounced that MGM China Holdings Limited began welcoming patrons to its neighboring MGM Cotai property almost 35 months ago and went on to record second-year earnings of around $309.53 million from a collection of 259 gaming tables.

Arrears amelioration:

The ratings behemoth reportedly furthermore stated that it expects SJM Holdings Limited’s debt to earnings ratio for 2020 to hit 7.1 before recovering to reach about 3.5-times for 2022 and roughly 1.8-times for 2023 ‘buoyed by the absence of any more substantial capital expenditure requirements in the short-term’.

Fitch Ratings Incorporated’s assessment reportedly read…

“SJM Holdings Limited’s development pipeline has been focused on the Grand Lisboa Palace, which was completed in 2020, and all material outstanding payments will be made by 2021 for which funds have been secured. Thereafter, we forecast annual maintenance capital expenditure of just $64.48 million. We do not expect the company to make any major investments in the foreseeable future as there is no more land available for gaming development in Macau and overseas investments are unlikely.”