SJM Resorts’ decision to reconvert an Hengqin office building into a hotel is a strategic move that aligns with government initiatives to increase room inventory in Macau, but risks increasing the gaming operator’s debt levels, Morgan Stanley analysts stated.
The gaming operator has entered into a memorandum of understanding (MOU) to pay HK$594 million ($76.3 million) to Shun Tak for the acquisition of nine floors of office and retail space in Hengqin, China, covering a gross floor area of 160,000 square feet.
The company plans to transform this space into a three-star hotel under its Lisboa brand, expected to feature approximately 300 rooms, each around 500 square feet, at an estimated cost of HK$2 million ($257,211) per key. However, the hotel is not anticipated to open for another 18 months.



Additionally, the development addresses the overcapacity of office buildings in Hengqin, enhancing the region’s appeal as a tourist destination.
Recent government announcements of multiple entry visas for Hengqin residents to visit Macau further facilitate this initiative, allowing easier access to Macau’s casinos.
Despite these positive aspects, the transaction raises some concerns, Morgan Stanley warned, as it is classified as a connected party transaction, as Shun Tak holds approximately 16 percent of STDM, which in turn owns about 55 percent of SJM Holdings.
‘Shun Tak’s relatively weak balance sheet could pose risks. Moreover, SJM Holdings is already facing high debt levels, with a net debt of HK$23 billion ($2.9 billion) as of September 2024, translating to roughly seven times its last twelve months’ EBITDA. This new financial outflow is expected to increase the company’s gearing further’, Morgan Stanley added.