RAM Ratings revises outlook on Genting Group’s AA1 ratings to stable

Published on 15 Sep 2022.

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RAM Ratings has revised from negative to stable the outlook on the AA1 ratings of Genting Berhad (Genting or the Group) and Genting Malaysia Berhad (GenM) while reaffirming the ratings. 

The revision is premised on the expectation that the Group remains on track to meet its rating thresholds in FY Dec 2023, supported by better than expected recovery traction and balance sheet and liquidity positions in FY Dec 2021. We expect more gradual recovery up to fiscal 2024, factoring in potential downside risks from a slowdown in economic growth or possible recession in Genting’s main operating regions, and protracted constraints affecting visitor traffic and operations. Uncertainty from new COVID-19 variants may potentially add to these risks.

Genting turned in an overall stronger than anticipated operating performance last year. Revenue and operating profit before depreciation, interest and tax of RM13.53 bil and RM2.59 bil, respectively, in FY Dec 2021 were 20% and 25% higher than our previous projections (FY Dec 2020: RM11.56 bil and RM2.13 bil, respectively). The outperformance was supported by the strong recovery in operations in Malaysia, the UK and the US when substantial pandemic-related restrictions were lifted. A lower cost base established during the pandemic also benefited earnings.

Improved operating cashflow together with capital expenditure and a dividend outflow that were lower than expected led to net debt of RM20.08 bil as at end-December 2021, significantly reduced from the projected RM24 bil. Consequently, the key metrics of net gearing and funds from operations (FFO) net debt cover at 0.38 times and 0.14 times, respectively, were healthier than anticipated. The lower net debt provided Genting with greater headroom to meet rating thresholds.

Looking ahead up to fiscal 2024, we see net debt continuing to rise, but at a slower pace, causing net gearing to peak at just below 0.45 times. Given the completion of Resorts World Las Vegas and major rejuvenation work at Resorts World Genting, the Group’s yearly capex will markedly decline to RM4.5 bil, the bulk of which will be spent on Resorts World Sentosa’s SGD4.5 bil renewal programme. We also assumed dividend payments of up to RM2 bil annually. FFO net debt coverage is projected to improve to above 0.3 times from next year, backed by a gradual improvement in earnings.

Genting’s ratings continue to be anchored by its solid market position with geographically diversified gaming businesses that include a monopoly in Malaysia, duopoly in Singapore and a leading video gaming machine operator in Northeastern US. Plantation, power generation, property and oil and gas businesses also afford the Group some degree of diversification. Genting’s strong liquidity profile is another key rating strength. As at end-June 2022, the Group held RM21.25 bil in cash and cash equivalents against short term debts of RM2.49 bil. GenM’s ratings are aligned with the Group’s, considering the close relationship of the two entities and anticipated parental support from Genting when required.

Table 1: Ratings of Genting and GenM

Genting Berhad	Ratings
Corporate credit ratings Global scale ASEAN scale National scale	gA3/Stable/gP2 seaAA1/Stable/seaP1 AA1/Stable/P1
RM2 bil MTN Programme (2012/2032) (Issued by Genting Capital Berhad)	AA1(s)/Stable
RM10 bil MTN Programme (Issued by Genting RMTN Berhad)	AA1(s)/Stable
Genting Malaysia Berhad	Ratings
Corporate credit ratings National scale	AA1/Stable/P1
RM5 bil MTN Programme (2015/2035) (Issued by GENM Capital Berhad)	AA1(s)/Stable
RM3 bil MTN Programme (2018/2038) (Issued by GENM Capital Berhad)	AA1(s)/Stable

Note:

1. Debt programmes under Genting Capital Berhad and Genting RMTN Berhad are backed by full, unconditional and irrevocable corporate guarantees from Genting.
2. Debt programmes under GENM Capital Berhad are backed by full, unconditional and irrevocable corporate guarantees from GenM.

 

Analytical contacts
Ben Inn
(603) 3385 2510
ben@ram.com.my

Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2022 by RAM Rating Services Berhad

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