Published on 18 Sep 2019.
RAM Ratings has assigned an AAA(s)/Stable rating to Genting RMTN Berhad’s proposed RM10 bil MTN Programme. On 20 August 2019, we reaffirmed Genting Berhad’s (Genting or the Group) global corporate credit ratings (CCR) of gA2/Stable/gP1 as well as its respective ASEAN and national CCR of seaAAA/Stable/seaP1 and AAA/Stable/P1. We have also reaffirmed the AAA(s)/Stable ratings of the RM2.0 bil MTN Programme (2012/2032) and RM1.60 bil MTN Programme (2009/2024) issued by the Group’s wholly owned subsidiaries, Genting Capital Berhad and GB Services Berhad, respectively. All the debt programmes are backed by full, unconditional and irrevocable corporate guarantees from Genting.
The ratings are underpinned by Genting’s strong business positions in the Malaysian, Singaporean and British gaming markets. Supported by Resorts World Genting (RWG)’s monopolistic position in Malaysia and Resorts World Sentosa (RWS)’s strong foothold in Singapore’s duopolistic gaming market, the Group’s operating margins compare well against those of its peers. Genting is also among the UK’s leading casino operators and the highest-grossing operator of video gaming machines in Northeastern US – although these operations fetch much thinner operating margins. Elsewhere, its operations in the Bahamas are still in the red, albeit improving, amid lower than expected business volumes.
We anticipate Genting’s balance sheet and cashflow-protection metrics to remain strong despite a projected RM24 bil of capex over the next three years. Given hefty capex, the Group’s debt load is expected to continue to grow substantially (end-June 2019: RM33.51 bil), resulting in a higher, albeit still sturdy, net gearing ratio (including money-market investments) of 0.2 times by end-December 2021 (end-June 2019: 0.01 times). At the same time, Genting’s funds from operations debt cover on a net debt basis (taking into account its sizeable cash coffers and liquid instruments) is envisaged to remain supportive of its ratings, coming up to about 0.6 times. We also expect the Group to maintain its robust liquidity position and financial flexibility.
On the other hand, the ratings are moderated by Genting’s aggressive expansion strategy, execution and market risks, and regulatory risk. Besides its substantial capex for the development of Resorts World Las Vegas, Genting will also embark on a five-year redevelopment exercise for RWS. Looking ahead, the Group proposes to acquire US-based loss-making Empire Resorts, Inc., and is also keen to bid for a casino licence in Japan. Any additional investments and cost overruns will heighten the already considerable demand on Genting’s resources; setbacks in the scheduled opening dates of projects will hold up the improvement of its financial profile. Moreover, the Group may require longer gestation periods to recoup its investments.
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Ratings on Genting RMTN Berhad