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RAM Ratings affirms Genting Group’s ratings
Published on 01 Oct 2024.
RAM Ratings has affirmed the AA1/Stable/P1 ratings of Genting Berhad (Genting or the Group) and Genting Malaysia Berhad (GenM) as well as the issue ratings of their debt programmes (Table 1). GenM’s ratings are aligned with the Group’s in view of their close relationship and anticipated parental support from the latter when required.
The ratings continue to be supported by Genting’s solid market position, with geographically diversified gaming businesses that include a monopolistic position in Malaysia, duopoly in Singapore and a leading video gaming machine operator in northeastern US. The plantation, power generation, property and oil and gas (O&G) businesses also afford the Group some degree of diversification. Genting’s strong liquidity profile is another key rating strength. As at end-June 2024, the Group held RM25.65 bil of cash and cash equivalents against short-term debts of RM3.32 bil. Over the next three years, we anticipate Genting’s operating performance to stay on the current uptrend and supportive of the ratings despite rising net debt levels.
The Group’s financial performance exceeded our key expectations in FY Dec 2023. Its top line rose 21.1% to RM27.12 bil (FY Dec 2022: RM22.38 bil) on account of higher revenue across all its leisure and hospitality (L&H) segments, particularly operations in Singapore and Malaysia which benefited from the recovery in tourism. The Group’s non-L&H segments of plantation and O&G saw a drop in revenue from weaker product prices, but were partially offset by the power division’s higher generation income. Genting’s operating profit before depreciation, interest and tax advanced 16.6% to RM8.29 bil (FY Dec 2022: RM7.11 bil) owing to the strong L&H showing.
Increased cashflow generation and a slower capital expenditure (capex) outlay resulted in lower net debt of RM17.93 bil as at end-December 2023, leading to a more robust balance sheet (net gearing and funds from operations (FFO) net debt coverage: 0.32 times and 0.47 times, respectively). However, three-year forward annual capex and investments may potentially exceed RM7 bil, mainly arising from Resorts World Sentosa’s revised SGD6.8 bil expansion and renewal plan and the O&G segment’s new USD963 mil floating liquefied natural gas vessel. As such, net debt is forecast to steadily increase to above RM25 bil over the same period, with net gearing potentially to rise towards 0.45 times and FFO net debt coverage to weaken to about 0.35 times; these metrics are still within its current rating thresholds.
Meanwhile, we will closely monitor developments on allegations of operational issues at Resorts World Las Vegas (RWLV), filed on 15 August 2024 by the Nevada Gaming Control Board (NGCB) before the Nevada Gaming Commission (the Commission). The complaint includes failures in dealing with bookmakers and convicted individuals. The NGCB is seeking disciplinary action including fines and/or suspension or revocation of RWLV’s gaming licence. In our view, the Commission’s eventual decision could impact Genting to a significant extent, especially if its licence is affected. The Group has avenues to respond to the allegations, reach a settlement or request a hearing. We will assess any potential impact of this event risk on Genting’s ratings when more information becomes available.
Analytical contacts
Ben Inn
(603) 3385 2510
ben@ram.com.my
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@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
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