SJM Holdings Will Be Left with No Cash Reserves in March 2023 in Case of Zero Revenues Due to Covid-19 Restriction, Analysts Say

The Macau casino giant SJM Holdings is quickly using all of its cash reserves as the special administrative region (SAR) of China tightens its “zero-Covid” policy which has already resulted in a significant decline in gambling revenues.

As CasinoGamesPro reported at the beginning of the week, the once-Portuguese territory started mass coronavirus testing over the weekend to keep its worst Covid-19 outbreak yet limited. The measures, however, triggered considerable drops in Hong Kong-listed casino stocks. SJM Holdings has been one of the worst-affected gambling operators by the measures, along with Sands China, MGM China, Wynn Macau, Galaxy Entertainment, and Melco Resorts.

So far, several analysts have shared concerns regarding the cash available to the casino empire that was established by the late Chinese gambling mogul Stanley Ho. In a note dated June 19th, JPMorgan shared that the liquidity of the company would be enough to sustain it until March 2023 in case SJM Holdings was unable to generate any revenues. This, however, has been the shortest period among the large casino operations in Macau.

In May, the overall gross gaming revenues in the special administrative region amounted to only $413 million, with the figure representing an almost 90% decline from pre-pandemic levels. Over the weekend, Macau authorities reported that the number of Covid-19 infections has reached its highest levels since the beginning of the pandemic. Now, analysts have warned that casino revenues were likely to decline to near-zero levels as a result of the tightening measures in the territory.

JPMorgan Estimates SJM Holdings’ Cash Liquidity to $710 Million by Mid-2022

Only about a week ago, the senior unsecured debt of SJM Holdings was downgraded from double B to double B minus by Fitch, a US credit rating agency, which at the time cited reduced confidence in the recovery of the gambling industry in Macau.

One of JPMorgan’s analysts recently confirmed that SJM Holdings is currently the firm’s least preferred name within the SAR. At the time, the gambling group announced that its HK$19-billion loan refinancing deal got the green light from local authorities and banks.

According to estimates provided by JPMorgan, SJM Holdings’ cash liquidity would be $710 million by the middle of the year, which basically means that the company would be able to last approximately 9 months with zero revenues and overall spending of $80 million a month to sustain its operations over the period. The US multinational investment bank and financial services provider also estimated that Sands China, which estimated liquidity is $1.6 billion, could maintain spending of $168 million a month until March 2023, while the liquidity of other gambling companies, such as MGM Resorts, Wynn Macau and Melco Resorts, was enough to sustain them until at least the middle of 2024 if they generated zero revenue over the period.

Since its founder’s death in 2020, SJM Holdings has been headed by Daisy Ho, a daughter of Stanley Ho.

In May 2022, the gambling giant announced that it would take over the Casino Oceanus from Sociedade de Turismo e Diversões de Macau, which is currently its main shareholder, in a deal worth HK$1.9 billion in new convertible bonds. Analysts from JPMorgan, however, did not like the timing of the move, which was announced at a time when the gambling company was facing the negative effects of a liquidity strain.

As the Financial Times reported, SJM Holdings refused to make any commentary on its cash liquidity other than reiterating the news of its loan refinancing.