Cost risk from satellite exposure by SJM personnel

Macau casino operator SJM Holdings is likely to face increased staff costs due to satellite casino problems, and may face more of that responsibility if third-party promoters of these properties decide to suspend casino operations or if SJM Holdings operates themselves, multiple analysts say.

In a note to SJM Holdings on Thursday, Peach Ratings, Inc. said its employees could have a liability cost of HK$600 million ($76.4 million) for a total of 14 satellites operated under the company’s gaming license.

“The challenging operating environment could also induce more satellite casino owners to stop operations when their contracts expire this month,” Fitch analysts Samuel Hui, Wendy Wu and Britton Costa said, referring to Macau’s general trading prospects. With SJM Holdings converting gaming staff to pay, we estimate that staff costs could increase by up to HK$600 million in the second half of 2022,” it said 파칭코

Securities firm JP Morgan Securities (Asia Pacific) said in a May 4 memo that SJM Holdings’ 14 satellite casinos employed about 6,900 employees, accounting for about a third of the group’s total number of employees.

“This could lead to additional operational costs for SJM in the second half of 2022. This is because we may have to convert the employees of satellite casinos who decide to suspend their games to direct pay,” the agency added.

Macau’s Economy and Finance Minister Ray Wei-Nong confirmed in a commentary in late May that if the satellite casino’s operations are shut down, it should absorb the gaming workforce there with personnel directly managed by licensees.

As the Grand Empower Hotel and Casino founder Empower Entertainment Hotel announced this week, a direct acquisition by a Conservation Partner will still face higher employee costs.

Macau satellites are hotels with casinos in general, which promote games under a so-called service contract with one of the city’s game concessions.

As Macau prepares for a new public tender for 10 years of gaming rights upon the expiration of this year’s current 20-year permit, the Macau government has been planning a overhaul of industrial regulations. Some of them deal with the state of satellites, and some industry commentators say the proposed new rules are likely to make it difficult to have a successful business model.

The Macau government said that if satellites decide to stop playing games, it will be a business decision, not because of a change in rules.

Macau Legends Development Limited, Paradise Entertainment Limited and Success Universe Limited are Hong Kong listed companies each pushing for five satellite casinos under the SJM Holdings License.

In the latter case, in an April commentary, they mentioned at least until Dec. 31, and later said the successful universe promoting the Ponte 16 resort near the Inner Harbor area wanted to go beyond 2022. Earlier this month, a senior executive at Macau Legends said he was playing at least until Dec. 31 this year.

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