American investment bank JPMorgan Chase and Company has reportedly labelled the liquidity situation of Macau casino operator SJM Holdings Limited as ‘somewhat worrying’ over concerns related to its ability to refinance amid the ongoing coronavirus-related slowdown.

According to a report from Inside Asian Gaming, this intelligence from the New York-headquartered financial institution was part of a Friday note outlining the potential investment opportunities of the six casino concessionaires in Macau. The source detailed that this filing did not express liquidity concerns regarding any other gambling firms in the former Portuguese enclave with the exception of SJM Holdings Limited.

Campaign check:

Hong Kong-listed SJM Holdings Limited is responsible for some 20 gambling-friendly venues in Macau including the iconic Casino Grand Lisboa property and the recently-premiered Grand Lisboa Palace facility. However, JPMorgan Chase and Company analysts Livy Lyu, Amanda Cheng and DS Kim reportedly declared that the company’s liquidity position ‘is somewhat worrying’ due to the fact that ‘its loan re-financing effort has stalled pending government approval’ and may result in it being required ‘to seek external funding.’

Read the filing from the JPMorgan Chase and Company trio…

“Plus, note SJM Holdings Limited’s operating expenses are likely to rise from the second half of this year amid the likely closure of some satellite casinos as we believe SJM Holdings Limited will have to bring their gaming staffs onto its own payroll. This would shorten its liquidity runway even further.”

Detrimental demotion:

Inside Asian Gaming reported that the updated advice concerning SJM Holdings Limited comes some two months after prominent credit ratings agency Fitch Ratings Incorporated downgraded the operator’s long-term foreign currency issue default rating and senior unsecured rating from ‘BB+’ to ‘BB’. The source explained that this move reflected the casino firm’s slow pace at procuring a new loan facility alongside uncertainty over the extension of its local license.

Operator optimism:

Nevertheless, the Chairman for SJM Holdings Limited, Daisy Ho (pictured), reportedly used an official statement last week to express confidence regarding her company’s ‘continued future presence in Macau.’ This declaration was purportedly mirrored by an assertion from the JPMorgan Chase and Company trio that the casino firm’s licensing worries have lately been ‘reduced if not largely removed’ owing to fresh clarity from the enclave’s government.

Leading light:

The JPMorgan Chase and Company note reportedly moreover advised investors that the remaining five casino operators in Macau are thought to have enough liquidity to last through at least another 18 months of slowdown ‘even at current levels of demand run-rates under the near-shutdown of the border’ with China. The firm purportedly went on to forecast that Galaxy Entertainment Group Limited is top of this class with cash reserves ‘to last 30-plus years’ while SJM Holdings Limited holds only enough for approximately six months.

The JPMorgan Chase and Company filing reportedly read…

“While it’s tempting to throw in the towel given near-zero visibility on China’s re-opening policy, we feel it may actually be difficult for these stocks to further disappoint investors here given the level of investor apathy, sentiment and positioning as well as current valuation. In short, we see the risk/reward tilted positively for those who can play a ‘waiting game’ for China to allow easier travel and mobility into 2023 and we suggest using volatility to gradually build positions on quality names.”