Moody’s Investors Service has changed the outlook on Melco Resorts Finance Limited and SJM Holdings to stable from negative as it expects the groups’ financial leverage to improve over the next year.
The outlook change to stable from negative reflects Moody’s expectation that “SJM’s financial leverage will improve significantly in the next 12-18 months, driven by a robust recovery of the gaming market in Macau, as well as the ramp-up of the company’s new property,” said Gloria Tsuen, a Moody’s vice president and Senior Credit officer.
Speaking on Melco’s improvement, the institution also expects the group “will start generating free cash flow [which] will help materially reduce their debt and leverage over the next 12-18 months.”
In a statement, Moody estimates the city’s mass-segment GGR to return this year to about 85% of the level in 2019 and fully recover in 2024, driven by premium mass customers.
The assumption is underpinned by strong pent-
up demand that will more than offset the effect of a likely softening of the Chinese economy.
Meanwhile, Moody’s believe that the VIP segment GGR will also likely return to 32%-36% of the level in 2019 in 2023-24, as direct VIPs replace part of the business lost to the junket crackdown in recent years.
Gaming operators faced deteriorated financial positions after revenues fell significantly amid the Covid-19 pandemic, yet revenues have recovered strongly since China’s reopening in early January this year.
Mass and VIP segments recovered to 93% and 38% in the third quarter this year and the same period in 2019, respectively. LV
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