Fitch provides outlook on Genting’s portfolio
Casino group Genting is backing rising vaccination rates in key markets, reduced expenditure and a strong rebound in the United States over the next two years.
Inside Asian Gaming reports that Fitch Ratings said the casino operator is expecting those three factors to help the company deleverage to below three times by the end of 2023.
While there are still risks around future border closures to the COVID-19 pandemic, Fitch said there is a high degree of confidence around Genting’s prospects following the recent lifting of restrictions in Malaysia and Singapore.
The reopening of Malaysia’s Resorts World Genting after a four-month closure is expected to see business volumes pick up rapidly, mirroring a previous reopening in August and September 2020 that saw gross gaming revenue reach 80 per cent of pre-COVID levels and hotel occupancy around 90 per cent.
“We assume that a limit on 50 per cent of the resort’s capacity will remain in place at least until the first quarter of 2022, but we expect a gradual relaxation of restrictions once COVID-19 is deemed endemic,” Fitch said.
“This expectation is in line with decisions made by other countries such as the US and UK to remove capacity limits.
Flagship Resorts World Las Vegas is key to Genting’s earning potential – Fitch
“Fitch expects Genting’s earnings before interest, tax, depreciation and amortisation margin to recover to pre-pandemic levels in 2022, although visitor volumes may not recover fully until 2023-24.”
In the United States, Fitch said operations will normalise in the coming months after enjoying strong pent-up demand, with Genting’s recently opened US flagship, Resorts World Las Vegas, to slowly build to fully-ramped earnings of US$350 million by the end of 2024.
“Nonetheless, Resorts World Las Vegas will become increasingly important for Genting as earnings grow, as the resort is the group’s flagship asset in the US,” analysts said.
“Fitch expects Resorts World Las Vegas to contribute the same earnings as Genting Malaysia on a proportional basis, factoring in Genting’s 49 per cent share in Genting Malaysia once it is fully ramped-up in 2024.
Resorts World Las Vegas’ growing contribution will also help Genting’s earnings to recover to pre-pandemic levels and deleverage to below three times by the end of 2023.”
Recovery in Singapore, home to Genting Singapore’s Resorts World Sentosa, will be somewhat slower, with revenue rising from 43 per cent of 2019 levels this year to around 50 per cent in 2022 but fully recovering by 2023.
Genting maintains BBB rating
Fitch maintained a “BBB” rating for Genting, stating: “Our expectations for deleveraging are supported by gradual recovery in Malaysia and Singapore, swift recovery in Genting’s US markets, combined with lower capex from 2022.
“All of Genting’s key operating markets have high vaccination rates, which suggests a return to strict lockdown is unlikely and therefore supports our recovery estimates for the issuer.
“Fitch believes the next six to nine months are critical and should provide better visibility on the sector’s recovery.
“During this period, we expect governments to provide clearer indications of their border and travel policies, which are key to determine if casinos and tourism can gradually return to normal, or if visitor volumes are unlikely to return to pre-pandemic levels.
“The transition towards living with COVID-19 in Singapore and Malaysia and handling of movement controls or border closures are key risks to our recovery expectations.
“Prolonged curbs will mean structural challenges for operators to achieve pre-pandemic visitor levels.”