SJM Holdings Liquidity at ‘Worrying’ Levels
Macau concessionaires are facing variable degrees of liquidity concerns, but the rack up away of the six appears to be SJM Holdings.
In a recent note to clients JPMorgan analysts DS Kim, Amanda Cheng and Livy Lyu compose that SJM may only feature enough upper-case letter to pull through another sextuplet months as the coronavirus pandemic continues weighing to a great extent on Macau operators.
SJM’s liquidity is somewhat worrying as its loan re-financing exertion has stalled pending regime approval, hence it’d experience to seek external funding in our view,” said the analysts. “Plus, promissory note SJM’s [operating expenses] are likely to come up from 2H22 amid the potential cloture of some orbiter casinos, as we trust SJM testament hold to bring their gaming staffs on its own payroll.”
Increasing expenses against the background of relieve qualified travelling to the world’s largest casino centre could farther keep back the Grand Lisboa Palace operator’s liquidity position, according to JPMorgan.
SJM Has Short Liquidity Runway
Various explore firms late highlighted the hard currency woes of Macau operators and while the estimates differ, the consensus is SJM is the whip turned of the six, possessing plenty working capital pull round only a matter of months based on current combust rates.
“From a financial standpoint, our analysis suggests SJM Holdings has only around VI months of liquidity runway, which is by far the shortest (versus 1.5 years to 30-plus years for peers) and makes us uncomfortable,” said the JPMorgan analysts.
In gain to ease restricted traveling to Macau, SJM is farther crimped by the shuttering of several satellite casinos. Plus, Fitch Ratings recently lowered its credit rating on SJM to “BB” from “BB+”, significance that if the gaming companion opts to come forth debt to shoring upward its cash position, it testament experience to make up higher interest rates to investors. The late opened Grand Lisboa Palace could also use up time to gain ground momentum, further mudding SJM’s outlook.
“The holding may occupy a long while to ramp up and attain a critical mass of patrons for breakeven,” notes the JPMorgan analyst team.
Split Outlook for Macau Concessionaires
JPMorgan is forecasting near-term profitability for Galaxy Entertainment Group, Melco Resorts & Entertainment (NASDAQ:MLCO) and Sands China, adding that MGM China, SJM and Wynn Macau are looking at losses.
The securities firm steadfastly prefers Sands Cathay — the Macau arm of Las Vegas Sands (NYSE:LVS) — among Macau equities.
“While it’s tempting to cam stroke in the towel granted near-zero visibleness on China’s re-opening policy, we experience it may actually live hard for these stocks to farther let down investors here granted the (worst) tear down of investor apathy, sentiment and positioning, as well as stream valuation,” indite the analysts.
They supply the near-term outlook favors operators that can buoy waitress for Red China to setback trend on its cypher tolerance insurance on COVID-19.
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