Gaming concessionaire SJM licenses nine of Macao’s 11 satellite casinos slated to close by the end of the year, making Monday’s announcement “much more complex” for it than for other affected concessionaires, according to JP Morgan Securities (Asia Pacific).
The investment advisory, reported by GGR Asia, noted that satellite casinos accounted for 4 percent of SJM’s trailing 12 months earnings before interest, taxes, depreciation, and amortisation (EBITDA), while Galaxy Entertainment and Melco Resorts’ – which each licensed one satellite casino – relied on them for less than 2 percent of EBITDA.
More crucially, SJM faced having to “bring likely thousands of staff under [its] direct payroll” as the government has said that all current employees at the satellites must be retained, JP Morgan said in the memo yesterday.
[See more: Macao to close all satellite casinos amid regulatory changes]
“This could even result in losses from wage burdens unless SJM successfully gains meaningful market share with these additional tables.”
On Monday, Citigroup noted that shifting tables into SJM’s self-operated casinos – likely mainly Grand Lisboa Palace and Grand Lisboa – would not necessarily equate to retaining market share. “There is a possibility that more tables could lead to a dilution in table utilisation,” it said.
The venues set to close are: SJM’s Grandview, Legend Palace, Fortuna, Landmark, Ponte 16, Le Royal Arc, Emperor Palace, Kam Pek Paradise, and Casa Real; Galaxy’s Waldo; and Melco’s Grand Dragon.
[See more: Analysts forecast a large drop in Macao’s gross gaming revenue for June]
The term “satellite casinos” refers to businesses under the licence of one of Macao’s six gaming concessionaires but operated by third parties within premises not owned by the concessionaire. These casinos have historically functioned under a partnership model, where revenue is shared between the concessionaire and the third-party operator.
The call to close them was not unexpected: amendments to Macao’s gaming law implemented at the start of the new 10-year concessions on 1 January 2023 mandated that all casinos must operate from premises owned by their respective concessionaires, and gave them a three-year transition period to achieve this.
SJM has said it was considering acquiring the hotels housing Ponte 16 and Le Royal Arc and converting them into directly-operated casinos in compliance with the revised gaming law.
