The courtship between Macau concessionaires and satellite casinos has most likely come to an end. The best example of that is SJM Holdings which, following its acquisition of Oceanus, will most likely not be looking to buy any additional satellite casinos moving forward, at least according to JP Morgan.
SJM Holdings Unlikely to Buy More Satellite Casinos
Company analysts commented on the current asset holdings by SJM and said that since the company owns both Grand Lisboa and Grans Lisboa Palace, along with the gaming floors there, it would be redundant to seek and add satellite casinos. SJM has also faced some liquidity shortages, which the company assures are nothing and Bernstein feels is correct.
Even in the worst-case scenario, the brokerage predicts that SJM can last three months, without breaking a sweat, but such a scenario is very unlikely. The question that JP Morgan asks is whether SJM would need to continue pursuing additional asset acquisitions. The answer is perhaps, but satellite casinos do not seem to be part of any immediate plans.
This analysis comes only a week after SJM acquired Oceanus from its parent company, STDM, for the sum total of HK$1.90 billion or $240 million. SJM is mostly looking to prop up its cash balances by purchasing the property outright, analysts seem to think. According to them, SJM had to pay close to $12.5 million or HK$100 million to STDM in annual rents, which will now be offset a little, although no additional information about the property’s EBITDA has been offered.
JP Morgan is not too fond of SJM, though, as analysts Amanda Cheng and Livy Lyu write that the company is their least preferred out of the six gambling concessionaires. Bernstein expressed a similar opinion, arguing that SJM was the least resilient property, or at the very least – it had the least liquidity to weather new serious storms.
Last-Minute Change in Legislation
SJM may not have wanted to acquire Oceanus as well, but the deal was already in progress when Macau made changes to the way satellite casinos would operate and ordered them to be located inside the casino property where a brand is licensed, partially defeating the purpose of having these establishments in the first place.