Fitch maintains a stable outlook on the credit rating of Malaysian gaming giant Genting Bhd as it expects leverage levels to decline after 2020. Fitch said in a report on Friday that it expects Resort World Las Vegas to make additional contributions to Genting’s bottom line and ease capital spending.
The ratings agency said it may reconsider its current A-rated rating once it becomes clear that Genting is operating with greater leverage than expected. Fitch confirmed its long-term foreign currency issuer default rating for Genting and its subsidiary Genting Overseas Holdings.
“Genting’s rating reflects its gaming monopoly position in Malaysia and a strong market share of about 36% in the Singapore market [through its subsidiary Genting Singapore Inc],” Fitch said. “The leisure and hospitality businesses in these countries account for about 80% of consolidated earnings before interest, taxes, depreciation and amortization.”
“The gaming industries in these countries are under strict regulatory oversight, and the resulting barriers to entry give some stability to Genting’s cash flow over the business cycle,” it added.
Fitch said Genting has a relatively conservative capital structure in net cash in the first half of this year. The rating agency said Genting enjoys “very comfortable liquidity” with a reported cash balance of 28 billion yuan ($6.68 billion) compared to 26 billion yuan in total debt at the end of June this year.
Resorts World Las Vegas, built by an indirect subsidiary with a 100% stake in Genting, is developing a casino resort in the Las Vegas Strip that is scheduled to open in 2020, the agency said.
Fitch estimates the project will result in a surge in capital spending in 2019 and 2020, increasing Genting’s leverage beyond what rating agencies will consider “negative valuation measures.”
“We have maintained a stable outlook based on our expectations of reduced leverage beyond 2020 due to earnings contributions from Resort World Las Vegas and adjustments in facility investment,” Fitch said. “However, significant negative changes to Fitch’s expectations for Genting’s leverage profile could lead to negative rating action.”
Resort World Las Vegas is described by investment analysts as a “billion dollar integrated resort” costing $4 billion.
Telsey Advisory Group LLC said Resort World Las Vegas may face delays in completion. In July, Research House said the resort’s opening was most likely delayed than planned, citing a drop in Chinese tourism due to the U.S.-China trade dispute and sanctions.
Fitch, close to home, reiterated that the Malaysian government’s decision to raise casino tariffs by 10 percentage points would have little impact on group profitability.
BY: 온라인카지노