4Q25 Results Fell Short of Market Expectations
SJM Holdings Announces 4Q25 Results: The company's net revenue reached HK$6.497 billion, down 13% year-on-year and 8% quarter-on-quarter, recovering to 76% of the 4Q19 level. The company's adjusted EBITDA was HK$0.67 billion, down 33% year-on-year and 24% quarter-on-quarter, recovering to 57% of the 4Q19 level, falling short of Visible Alpha's consensus estimate of HK$0.896 billion. We believe that the company's performance was primarily affected by a decline in its market share of total gaming revenue, as well as one‑time costs incurred from co‑hosting the National Games.
Development trend
With the complete closure of all satellite casinos by the end of 2025, we believe that SJM Holdings may face a loss of market share in gaming revenue, primarily because its competitors have already begun vying for customers who previously frequented the satellite casinos. SJM has started to increase its targeted marketing and rebate investments for this customer segment in order to retain them.
Although the number of gaming tables at the MGM Cotai casino increased by 120, affected by a one‑time cost related to the National Games (HK$40 million), MGM Cotai's adjusted EBITDA turned negative in 4Q25.
We expect the company's capital expenditure to be 2 billion HKD in 2026 (for casino area upgrades) and 1 billion HKD in 2027.
On 4Q25, the company's average daily operating cost was HK$24.4 million (up 17.3% year-on-year and 13.7% quarter-on-quarter), and we expect this level to be maintained in 2026.
Profit Forecast and Valuation
Taking into account the impact of the closure of satellite casinos, we have lowered our adjusted EBITDA forecasts for 2026 and 2027 by 3% and 5%, respectively, to HK$4.419 billion and HK$5.219 billion. The company's current trading price corresponds to a 9‑times adjusted EV/EBITDA multiple for 2026. We maintain a "Neutral" rating and a target price of HK$2.20, which represents an 8‑times adjusted EV/EBITDA multiple for 2026 and implies a 5% downside from the current share price.
Risk
The business at The Venetian Macao is growing more slowly than expected; the recovery is progressing more slowly than anticipated; and amid intensifying competition, the company may face the risk of losing market share.
