Fitch Ratings Inc has praised Malaysia-based gaming conglomerate Genting Bhd for its “continued strong market position” in the Malaysian and Singaporean casino sectors, via its units Genting Malaysia Bhd and Genting Singapore Plc, respectively.
In a Monday note, the credit rating agency affirmed Genting as having an “A-” rating with a “stable” outlook.
“Genting’s ratings reflect its monopoly gaming-market position in Malaysia and robust share of around 35 percent in Singapore’s duopolistic market,” said the institution. “Its leisure and hospitality business in these countries together accounts for over 80 percent of consolidated EBITDA [earnings before interest, taxations, depreciation and amortisation],” it added.
Fitch said that it expects “higher earnings” at Genting’s Malaysian leisure and hospitality and oil-palm plantation businesses. The Malaysia-based conglomerate is spending billions of U.S. dollars in the revamp of the group’s Malaysia venue, Resorts World Genting (pictured).
Genting Malaysia has been revamping and opening new facilities at Resorts World Genting, under its Genting Integrated Tourism Plan (GITP). GITP is a multi-phase initiative described as a 10-year, MYR10-billion (US$2.37 billion) master plan for a major revamp for Resorts World Genting.
The Malaysian property has opened several new facilities, and other attractions – including the remaining floors at its new mall and casino – are scheduled to open progressively from 2017. A theme park at the property is now expected to open by the second half of 2018.
“We expect these developments to result in a sustained increase in visitor arrivals over the next three years, from 20 million in 2016, and drive revenue growth for Genting’s leisure and hospitality business,” said the ratings house.
Fitch also noted that Genting Singapore had seen margins rebound since the second half of 2016, “due to lower impairment of receivables as a result of tighter credit policies and a remodelled commission structure, in addition to an overall cost-management focus”.
“Genting Singapore’s annualised first half 2017 EBITDA margin was around 14 percentage points higher than in 2016 and its annualised revenue was around 6 percent higher. This improved its first half annualised EBITDA by almost 50 percent compared with 2016, highlighting Singapore’s better gaming-market conditions,” said the credit rating agency.
Genting Singapore reported net profit of SGD143.3 million (US$105.6 million) for the second quarter of 2017, compared to a net loss SGD10.5 million in the prior-year period.
Fitch additionally said that it expects the Genting group to turn into a net debt position in the coming years due to higher capital expenditure, as the group is also expanding its presence in the United States. The group is currently developing Resorts World Las Vegas in Nevada, United States. The company expects full-scale construction to start later this year, aiming for a 2020 opening.
The institution’s capex estimates for the Genting group do not factor in potential investment by Genting Singapore in Japan “due to significant uncertainties”. The Singapore casino operator announced earlier this month that it had applied to offer Japanese-yen denominated bonds in Japan “for working capital and general corporate purposes in Japan”.
Genting Singapore established in September a branch office in the Japanese capital, Tokyo. The firm has previously expressed interest in investing in a casino resort in Japan once all related legislation is in place there.
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Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings