Fitch Ratings has considered the outlook of Malaysian tourism and gaming group Genting Malaysia Berhad’s (GENM) as ‘stable’ in a recent dispatch.
The rating agency indicated that although GENM’s revenue rebound has been ‘slower than our expectations, and the impact on leverage has been compounded by Empire’s weak metrics’ it still saw a limited impact on parent company Genting Berhad (GENT) proportionately consolidated leverage metrics, due to significantly higher cash flow diversification than GENM.
Genting Berhad has seen a 14 percent growth in revenue during the first half-year period, totalling RM2.47 billion ($531 million), despite adjusted EBITDA falling by 28 percent to RM447.9 million ($96.43 million).
The firm also said that in the second quarter it had a higher share of losses in associates, namely Genting Empire Resorts LLC, the holding company of Empire Resorts Inc, amounting to RM30.1 million ($6.4 million), mainly due to “higher payroll costs and operating expenses incurred during the period”.
‘Revenue in 2022 and 1H23 in Malaysia, which contributes over 60 percent of GENM’s consolidated figure, was lower than our expectations, affected by factors such as heavy rainfall at the turn of 2023 and a landslide in late 2022, hindering access to the resort. As a result, we have cut our revenue expectations to around 90-95 percent of the 2019 level in 2023 and 2024, from around 95-100 percent,’ Fitch noted.
‘Revenue growth should be driven by a steady increase in domestic traffic and higher international tourists, supported by the likely repair of the access road by 1H24.’
The group is currently seeking a casino license in the US, with Fitch giving a ‘BBB-‘ Long-Term Issuer Default Rating GENM’s wholly owned subsidiary, Genting New York LLC (GENNY), due to the risk that it may not win a full-scale casino licence.
‘GENNY, which offers slot-like gaming in New York City, intends to bid for one of three full-scale downstate New York casino licences that are likely to be awarded by 1H24, although it faces strong competition,’ Fitch added.
For the rating agency, a licence would provide access to a deep market, boost GENM’s geographic diversification and potentially lower tax on GENNY’s gross gaming revenue from around 65 percent currently, however, it would also ‘bump up capex’.
‘GENM may partly fund this capex through the sale of land in Miami, Florida, which is worth around $1 billion according to an independent valuer,’ the dispatch reads.