Gov’t U-turn on satellite casinos to particularly benefit SJM

Satellite casino running under SJM Holdings license

SJM Holdings Ltd. shares rose to as much as 9.7% yesterday following the government reversing its decision on the gaming law amendment that all casinos would mandatorily be located in venues owned by the concessionaires.

According to data from the Gaming Inspection and Coordination Bureau (DICJ), 18 satellite casinos are operating under the SJM Holdings license. However, these figures do not include the three that were rumored to close in this month, including Casino Golden Dragon, Royal Dragon and Casino Million Dragon.

As cited in Dow Jones Institutional News, SJM rose as much as 9.7% before paring its gains to 5.8% at HKD3.26.

The stock is down about 38% this year and 62% over the past 12 months.

Melco International Development Ltd. added 3.37% in yesterday’s trade at the Hong Kong Stock Exchange, while Wynn Macau Ltd. and Galaxy Entertainment Group Ltd. gained 0.5% and 0.6% respectively. MGM China slightly gained 0.24%, while Sands China Ltd. slid by 0.5%.

Investment bank analysts have said that the U-turn of the government would particularly benefit SJM, as it has ties to the majority of the city’s 40 satellite casinos. 

“The proposed changes directed towards satellite casinos should alleviate investors’ concerns on SJM’s potential shouldering of the significant staff costs at the satellite casinos,” Citi analysts said in a research note.

“More important, the changes should clear up the last hurdle for refinancing.”

On Friday, casino stocks in the U.S. trading market rallied following the SAR government’s announcement that it is considering lowering the gross gaming revenue (GGR) taxes by up to 5% if casinos are able to bring players from outside China. 

This consideration comes long after China’s enactment of Article 303 of the Mainland’s Criminal Law, which the parliamentary committee considers may affect the source of tourists from the mainland. Hence, there is a need to attract a different source market.

For the investment bank, this is “good news for all concessionaires.”

Macau’s gaming sector is in turmoil as the city has been experiencing drought in the tourism sector given the border measures being implemented as the neighboring regions have recorded fresh Covid-19 outbreaks. 

The GGR dropped steeply to MOP2.68 billion in April, the lowest figure recorded since September 2020.

Last month’s revenue is 68.1% lower year-on-year and 27.1% lower than in March, and only equating about 11% of pre-pandemic figures for the same month.