Genting Bhd is on track to reduce its leverage by the end of 2023, even though EBITDA in its primary markets of Malaysia and Singapore is unlikely to reach pre-pandemic levels until 2024, Fitch Ratings said.
The firm said its expectations for debt reduction is based on a swift recovery in the U.S. market, lower capital spending from next year and a gradual recovery in Malaysia and Singapore.
“All of Genting’s key operating markets have a high vaccination rate, which suggests a return to strict lockdowns is unlikely and therefore supports our recovery estimates for the issuer.”
However Fitch also noted that the next six to nine months are “critical” in providing visibility on the sector’s recovery. Government’s are likely to provide clearer indications of their border and travel policies, which will determine if visitor levels can return to normal, or whether they are unlikely to return to pre-pandemic levels.
The transition towards living with Covid in Singapore and Malaysia and handling of movement controls or border closures are key risks to our recovery expectations,” it said. “Prolonged curbs will mean structural challenges for operators to achieve pre-pandemic visitor levels.”
Resorts World Genting in Malaysia was allowed to reopen on Sept. 30 after being closed for four months, while Resorts World Sentosa in Singapore has been mostly open this year, but is operating with capacity restrictions.
Analysts expect the Malaysian arm to show a faster rebound as it is less reliant on foreign tourism. Malaysia has also now allowed interstate travel, which is seen as giving a further boost.
Fitch rates Genting Bhd at BBB. It says its deleveraging will be helped by a 50 percent reduction of its share of capex from 2022. The agency is assuming capex for a $4.5 billion dollar expansion of the Singapore IR will be evenly spread out or even delayed until 2023 if the company faces construction constraints due to Covid.