Ratings agency Moody’s has changed its outlook on Genting Berhad and Genting Singapore, shifting the rating to stable from negative.
In a Monday release, the group noted that Moody’s had affirmed the ‘Baa2’ issuer ratings of Genting Berhad and the A3 issuer rating of Genting Singapore.
The group’s Genting Overseas Holdings Limited (GOHL), also had its ‘Baa2’ rating affirmed.
Yu Sheng Tay, a Moody’s analyst, noted that “The change in outlook to stable and rating affirmation reflects our expectation that credit metrics across the Genting group of companies will improve over the next 12-18 months, supported by continued recovery in operating performance. For Genting Berhad, it will also benefit from full-year earnings contribution from Resorts World Las Vegas”.
The Las Vegas property opened in June of 2021, but its ramp up was a bit slower than expected, according to analysts.
Asides from its Nevada property, however, the group is also focusing on a potential new York City property – as three new casino licenses in downstate New York come up for grabs, expected to be awarded this year.
Speaking of the plan, the Moody’s analyst notes that “The group’s plans to expand its New York gaming operations under Genting Malaysia Berhad may affect its credit quality, but such developments, including the timing and funding structure of the investment, ultimately hinge on the awarding of the casino license, which remains uncertain at this point”.
The group reportedly is selling off its Miami real estate, for over $ 1 billion, in order to fund its continual US expansion – including its offerings in Vegas.
Analysts are now expecting Genting Berhad to register consolidated EBITDA of MYR8.8 billion ($2.04 billion) in 2023, up from MYR7 billion in the previous fiscal year, which ended September 30th, 2022.
Moody’s notes that the ratings ‘reflect an ongoing recovery in the group’s leisure and hospitality businesses, particularly in Malaysia and Singapore, where pandemic and border restrictions eased last year. At the same time, Moody’s also expects Resorts World Las Vegas (RWLV), which opened in June 2021, to contribute meaningful EBITDA in 2023’.
The group notes that its leverage could fail to reach the expected 4.5x level in 2023 ‘if the group wins a casino license in New York because of upfront license fees and development costs, which could exceed $1 billion’.
Regarding the group’s Singapore operation, Moody’s expects EBITDA to improve to SGD990 million ($745.06 million) in fiscal 2023, up from SGD548 million ($412.42) during the fiscal year ending June 2022.
However, analysts note that Genting Singapore’s ‘earnings are unlikely to return to 2019 levels until 2024-25′.
The analysts note that ‘the company is dependent on the recovery of Singapore’s tourism sector and faces cost pressures from rising utilities and labor costs, while casino tax rates have increase since March 2022’.