Fitch Downgrades SJM Holdings to B+ Amid Share Decline

Fitch Ratings has downgraded SJM Holdings Limited's Long-Term Foreign-Currency issuer default rating from BB- to B+, giving the Hong Kong-listed casino operator a stable outlook. A B+ rating signals highly speculative fundamental credit quality. Fitch also lowered the senior unsecured rating on notes issued by subsidiary SJM International Limited to B from BB-, with a Recovery Rating of RR5. The downgrade follows a similar move by Moody's earlier this month, which cut SJM's corporate family rating to B1 from Ba3.

Satellite Casino Closures Drive SJM Market Share Below Forecast

The downgrade was driven largely by SJM's weakening market position following the closure of its satellite casinos. The operator recorded a first-quarter 2026 market share of 9.6%, falling short of Fitch's earlier assumption of 10.7% for the full year. "The downgrade reflects Fitch's view that SJM Holdings' leverage trajectory is no longer consistent with its previous rating level," the agency said. Fitch analysts Samuel Hui, Rebecca Tang, and Tyran Kam cited market share dilution from the closure of satellite casinos and continued lackluster performance at Grand Lisboa Palace.

SJM management is pursuing expanded use of reassigned satellite tables, including new gaming areas at Grand Lisboa Palace and Casino Lisboa. Fitch now projects market share to hold between 9.7% and 9.8% through 2028.

Grand Lisboa Palace Volume Decline Weighs on SJM Performance

Fitch flagged continued underperformance at the Grand Lisboa Palace Cotai complex as a distinct concern. Non-rolling gaming volume growth at the property slowed to 3% year-on-year in the fourth quarter of 2025 before declining 1% in the first quarter of 2026. The agency expects Grand Lisboa Palace's market share to remain near the mid-2% range, reflecting competitive pressures and limitations in the property's product offering. SJM reported a first-quarter net loss of approximately HKD62 million, compared with a net profit of HKD31 million a year earlier. Net revenues declined 22.8% year-on-year to HKD5.36 billion, while group-wide adjusted EBITDA fell 4.3% to HKD917 million.

SJM Leverage and Liquidity Outlook Despite Rating Cut

Despite the downgrade, Fitch projects a gradual EBITDA improvement. The agency forecasts adjusted EBITDA of HKD3.7 billion in 2026 and HKD4.2 billion in 2027, up from HKD3.0 billion in 2025.

EBITDA leverage is expected at 7.8x in 2026 and 6.5x in 2027, still well above Fitch's downgrade threshold of 5.0x.

The improvement is expected to be supported by higher margins following the exit from the low-margin satellite model. Revenue recapture through self-operated properties, including the recently acquired L'Arc Casino, along with cost savings from staff redeployment and natural attrition, are also contributing factors. Fitch described SJM's liquidity as adequate, with HKD2.0 billion in available cash and HKD3.6 billion in undrawn revolving facilities as of end-2025.