Daily Brief Credit: SJM Holdings – Earnings Flash – FY 2023 Results – Lucror Analytics and more

SJM Holdings has released Q4 and FY 2023 numbers that were mixed, in our view. The ramp-up of Grand Lisboa Palace (GLP) remained slow, with the asset’s GGR increasing 11% q-o-q in Q4 (in line with industry growth). As a result, SJM’s market share from Q2 to Q4 remained stagnant at c. 12%.

On a brighter note, GLP achieved EBITDA breakeven in Q4/23, with earnings likely to rise further in FY 2024 (on the back of broader industry growth). In addition, excess staff costs stemming from the late-2022 closure of satellite casinos continued to narrow. The EBITDA margin has recovered to the pre-pandemic level of 12%, thanks to improvement in the higher-margin mass gaming segment, albeit this was partly offset by the impact from excess staff costs.

We expect SJM to generate slightly positive FCF in FY 2024 (vs. neutral FCF in Q4/23). That said, the company’s profitability should lag that of peers for the next 1-2 years, as it is unlikely that the costs associated with having excess gaming staff on the payroll will be fully resolved until 2025. This means that SJM’s pace of deleveraging may remain slower than peers.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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