2025-06-09-花旗集团-澳博控股（0880）_澳博控股（0880.HK）_终止七家卫星赌场的博彩业务_并可能收购新濠天地和十六浦赌场_11页_375kb

SJM Holdings (0880.HK) Summary

Core Content

SJM Holdings (0880.HK) has announced its intention to acquire the properties of Casino L'Arc and Casino Ponte 16, while terminating gaming operations at seven other satellite casinos in Macau. These seven casinos will close by the end of 2025, with their gaming tables and slot machines being reallocated to SJM's self-operated casinos, primarily Grand Lisboa Palace and Grand Lisboa. The company also plans to reassign local staff from the shuttering casinos to its own operations, and to invite non-SJM employees to apply for roles at SJM.

Main Points

• Acquisition Plan: SJM is seeking to acquire the properties of Casino L'Arc and Casino Ponte 16, although no binding agreements have been reached yet.
• Closure of Satellite Casinos: Gaming operations at the other seven satellite casinos will end by the end of 2025.
• Staff Reassignment: Local employees from the closing satellites will be reassigned to similar roles at SJM's self-operated casinos. Non-SJM employees will also be invited to apply for positions.
• Asset Reallocation: Gaming tables and slot machines from the shuttering casinos will be transferred to SJM's self-operated casinos, potentially increasing their capacity.
• Impact on Costs: The reassignment of staff and reallocation of assets may lead to a resurgence of "excess costs from satellites" that SJM previously incurred from 2Q23 to 4Q24, starting as early as 1Q26E.
• Government Comments: The Macau government confirmed that gaming tables from the closing satellites will be returned to the related concessionaires. The conversion of satellite casinos to self-operated ones must occur before the end of 2025.
• Valuation: The target price of HK$1.70 is derived from a combination of sum-of-the-parts (SOTP) and discounted cash flow (DCF) valuations, with an equal weighting of both.
• Earnings Forecast: The current model suggests that satellite casinos contribute 8-9% of SJM's 2025-27E property EBITDA. The impact of the potential acquisition is considered premature to assess.
• Investment Rating: Citi Research has assigned a "Sell" rating with a target price of HK$1.70, implying an expected share price return of -29.2% and a dividend yield of 0.0%.

Key Information

• Net Debt: As of end-1Q25, SJM's net debt stands at HK$23.5bn, including a HK$2bn shareholder loan, which is above the industry average (~6x net debt-to-EBITDA).
• Valuation Methodology:
  • SOTP Valuation: Gives a -HK$1.23/share equity value, using a 5.1x 2025EV/EBITDA multiple, which is 2 S.D. below its historical average.
  • DCF Valuation: Gives a -HK$4.63/share equity value, based on a WACC of 8% and a long-term growth rate of 2%.
• Risk Factors:
  • Upside Risks: More effective marketing plans for Grand Lisboa Palace, less-than-expected market-share loss at Grand Lisboa, and dividend resumption.
  • Downside Risks: Increased competition, wage and cost inflation, and the impact of macroeconomic downturns on tourism and visitation.

Analyst Comments

• George Choi, CFA: The lead analyst, who has a "Sell" rating, notes the potential for cost resurgence and the uncertain impact of the acquisition.
• Catalyst Watch: The analyst has issued several Catalyst Watch calls, indicating both upside and downside expectations based on short-term events.
• Citi Research Affiliations: Timothy Chau and George Choi are the analysts involved. The legal entities involved are Citigroup Global Markets Asia Limited.

Additional Disclosures

• Conflicts of Interest: Citi Research may have a conflict of interest due to its business dealings with companies covered in its reports.
• Regulatory Compliance: The report complies with regulations in various jurisdictions, including FINRA, Israeli, and Turkish laws.
• Distribution: The report is disseminated to both institutional and retail clients through Citi's proprietary platforms, with certain content available via third-party aggregators.

Summary Table

Conclusion

The decision to acquire two casinos and close others could have significant implications for SJM's cost structure and operational efficiency. The reassignment of staff and reallocation of assets may lead to cost resurgence, while the acquisition could provide growth opportunities. However, the current valuation and investment rating suggest a bearish outlook, with the target price reflecting a substantial expected decline in share price. The impact of the acquisition remains uncertain and is subject to further negotiations and market conditions.