Fitch Downgrades SJM Holdings to B+

Fitch Ratings has downgraded SJM Holdings Limited’s Long-Term Foreign-Currency Issuer Default Rating from BB- to B+, citing weaker-than-expected EBITDA growth and continued pressure on the company’s Macau market share. The agency linked the downgrade to the closure of satellite casinos and the softer performance of Grand Lisboa Palace.

According to Fitch, SJM recorded a market share of 9.6% during the first quarter of 2026 following the shutdown of several satellite operations, falling short of the agency’s earlier forecast of 10.7% for the year. Although management plans to improve performance by reallocating returned gaming tables to new areas at Grand Lisboa Palace and Casino Lisboa, Fitch now expects SJM’s market share to remain between 9.7% and 9.8% through 2028.

The ratings agency also revised its leverage outlook for the company, stating that SJM’s expected debt metrics no longer align with its previous BB- rating. Fitch believes leverage will remain above the threshold associated with that rating over the next two years because earnings growth is likely to progress more slowly than originally projected.

Despite the downgrade, Fitch expects SJM’s EBITDA to improve gradually as the operator continues shifting away from the lower-margin satellite casino model. The agency also believes the company could regain part of its lost business through self-operated venues, including the recently acquired L’Arc Casino.

In addition, Fitch pointed to possible margin improvements through cost reductions, staff redeployment and natural attrition following the satellite casino closures. The agency forecasts Fitch-adjusted EBITDA of HK$3.7 billion for 2026, increasing to HK$4.2 billion in 2027.

Grand Lisboa Palace was also highlighted as an area of concern. Fitch noted that mass-market volume growth at the Cotai resort slowed significantly over recent quarters, easing from 17% in the second quarter of 2025 to 11% in the third quarter, before dropping to 3% in the fourth quarter and turning into a 1% year-on-year decline during the opening quarter of 2026.

The agency expects Grand Lisboa Palace to maintain a market share in the mid-2% range, citing strong competition in Macau and limitations within the property’s current product offering.

Fitch’s revised outlook suggests SJM remains under pressure to accelerate recovery within its Macau operations. While the company may benefit from a leaner operating structure and lower costs following the transition away from satellites, the agency believes the pace of improvement will remain limited over the near term.

The downgrade ultimately reflects Fitch’s concerns over slower earnings momentum, weaker market share performance and continued challenges at Grand Lisboa Palace, all of which contributed to the lower rating and revised leverage expectations.