SJM Holdings management recently confirmed that they are in potential acquisition talks with two Macau satellite casino owners and are preparing to completely shut down their satellite casinos by the end of the year. This move marks an important step in SJM's strategic adjustment of its gaming landscape. According to a report by Macau Force, the news came from a corporate performance meeting held last weekend, where management formally disclosed the plan to investors and emphasized that the acquisition talks are still actively progressing.
Meanwhile, SJM has reached an agreement with its parent company, Sociedade de Turismo e Diversões de Macau (STDM), to acquire a 7,504 square meter venue inside the Grand Lisboa Hotel on the Macau Peninsula for a total of HK$529 million, planning to relocate the gaming tables and slot machines from the satellite casinos that are about to close to this location for centralized operations.
SJM had previously made it clear that its nine satellite casinos will cease operations by the end of the year, and plans to incorporate the Ponte 16 and Grand Emperor satellite casinos into SJM's self-operated system to enhance overall operational efficiency and profitability. Industry insiders point out that this move is not only an integration of existing gaming assets but also a forward-looking layout for the company to respond to future market changes.
J.P. Morgan analysts stated in a research report that although management has not disclosed specific transaction progress, negotiations are confirmed to be ongoing, with prices and timelines yet to be finalized. According to current regulations, once a transaction is reached, it must be completed by the end of the year, including acquisition and asset integration. Vitaly Umansky, a senior analyst at Seaport Research Partners, pointed out that about 11% of SJM's EBITDA for the second quarter of 2025 comes from satellite casinos, so even if the gaming tables are moved to the new Grand Lisboa venue and the acquisition is completed, the original market share may still be difficult to fully retain. He expects the company's overall market share to decline somewhat, but since the profit margin of self-operated casinos is higher than that of satellite casinos, overall profitability is still expected to improve.
In terms of financial performance, SJM Holdings' net income in the first half of the year grew by 6.1% year-on-year to HK$14.639 billion, with gaming net income increasing by 5.7% to HK$13.628 billion; however, adjusted EBITDA fell by 5% year-on-year to HK$1.646 billion, with a book loss of HK$182 million and a loss per share of 2.6 Hong Kong cents, and the company did not distribute a special dividend. Analysts believe that although the closure of satellite casinos puts pressure on short-term earnings, in the long term, self-operated operations will help improve overall profit margins and optimize capital operations.
Several investment banks have also adjusted their ratings and target prices for SJM. Goldman Sachs stated that the company has a high leverage ratio, needing to bear the Hengqin hotel project and digest the financial pressure brought by the acquisition of two satellite casinos and the expansion of Grand Lisboa. The bank adjusted its EBITDA forecast for 2025 to 2027, ranging from a decrease of 12% to an increase of 2%, and raised the target price from HK$2.7 to HK$3.1, maintaining a "neutral" rating. Citibank is optimistic about the revenue brought by the acquisition of additional floor space in the Grand Lisboa Hotel, expecting more than 110 gaming tables to be moved to the new gaming area, likely to enhance EBITDA performance, thus raising its earnings forecast for 2026 to 2027 by 34% to 50%, and raising the target price from HK$2.3 to HK$2.8. However, Citibank also pointed out that due to the difficulty in recovering market share in the short term, the acquisition of Ponte 16 and Grand Emperor will further increase the debt ratio, limiting short-term dividend space, maintaining a "sell" rating.
J.P. Morgan reminds that the contribution of satellite casinos to the company's overall revenue cannot be ignored, and a short-term decline in market share is inevitable, but the high profit margin of self-operated casinos will help improve long-term profit quality. Seaport Research Partners also pointed out that if the acquisition and integration are completed, SJM's market share in 2026 to 2027 may drop from 12.3% to 11%, showing that market share adjustment is inevitable, but the self-operated strategy can still enhance operational efficiency.
Overall, SJM's acquisition and integration of satellite casinos is both a proactive measure to respond to market structure changes and reflects a forward-looking layout for future profit models. By centralizing self-operated venues, SJM is expected to optimize casino layout, improve operational efficiency, and profit margins, although facing market share decline and financial pressure in the short term, it is beneficial for the company's sustained competitiveness and profitability in the Macau gaming market in the long term.
