Macau gaming operator SJM Holdings may only resume dividend payments in 2026, as its top priority remains deleveraging, according to a report from Morgan Stanley.
The information follows the Asia Pacific Summit 2024, where the Morgan Stanley research team met with SJM Holdings’ management.
Morgan Stanley notes that, despite expectations for SJM’s net income to turn positive in 2024, the company’s dividend policy is closely tied to its efforts to reduce debt.
With net debt still at a high level, SJM aims to reduce its net debt-to-EBITDA ratio to 5x over the next 18 months.
As of the end of the third quarter of 2024, SJM’s net debt-to-hold-adjusted EBITDA stood at 6.5x, and the company has projected capital expenditures of approximately HK$1 billion ($129 million) per year from 2024 to 2026.
While the company is expected to return to profitability in 2024, with third-quarter net income turning positive at HK$101 million ($13 million), compared to a loss of HK$60 million ($7.7 million) in 9M24, Morgan Stanley believes that the resumption of dividends will be slower than that of its peers.
Expansion plans for Grand Lisboa Palace
On the operational front, SJM is focusing on driving growth through its Grand Lisboa Palace (GLP) property. The company plans to boost GLP’s performance by introducing more dining options, with 10 new restaurants expected to open over the next six months. As of 3Q24, five restaurants have already opened.
Additionally, SJM has appointed a new Chief Gaming Officer and plans to hire 50 more staff, predominantly premium mass hosts, to enhance operations and guest services.
According to a recent report, former Star Entertainment Group COO and gaming veteran Damian Quayle has joined SJM Resorts as Chief Gaming Officer.
However, these changes are expected to increase daily operating expenses at GLP, which may rise to HK$8 million ($1.03 million), up from HK$7.6 million ($977,000) in 3Q24. The company aims to achieve a 3 percent market share in gross gaming revenue (GGR) at GLP within the next 2-3 quarters, up from 2.7 percent in 3Q24.
In addition to expanding its restaurant offerings, SJM is refurbishing its hotels at GLP and adding 50 suites to its existing 470-room inventory. This investment in infrastructure is part of SJM’s broader strategy to attract higher-spending customers and improve overall performance.
