Were the Genting brand to win a gaming concession in Macau, it might “cloud” the group’s post-pandemic recovery, says a Monday note from S&P Global Ratings Inc.
It was referring to the response last week by GMM Ltd, an indirect unit of Genting Malaysia Bhd – part of the wider Genting group – to the Macau government’s public tender for one of up to six new 10-year gaming permits.
Such a move “could shift the group’s focus to debt-funded growth from deleveraging, if it gets the gaming concession,” stated the ratings house.
“This is contrary to our earlier expectation that Genting Bhd’s credit quality will stabilise following the completion of a major investment cycle while an operational recovery is under way,” added the S&P analysts.
On September 16 – after formally opening all submissions to the tender – the Macau authorities said that proposals by the six incumbent operators had been accepted unconditionally, but that the acceptance of GMM’s was “conditional”, without giving further details.
S&P stated in its Monday memo: “Despite offering a wider geographic footprint and an opportunity for the group to expand, Macau’s gaming market would also imply more intense competition in a highly regulated and scrutinised market versus other markets, such as Malaysia and Singapore.”
The ratings house currently has a ‘BBB-, Stable’ rating on Genting Malaysia, which has a monopoly licence in Malaysia, and also runs casinos in the United States, the Bahamas, the United Kingdom, and Egypt.
In the second quarter, Genting Malaysia had seen its net loss narrow significantly, aided by factors including recovery in consumer demand at the Malaysia resort.
S&P currently has three casino groups linked to current Macau licences – Las Vegas Sands Corp, parent of Sands China Ltd; Melco Resorts and Entertainment Ltd; and MGM Resorts International, parent of MGM China Holdings Ltd – on credit watch with negative implications, “due to stringent Covid restrictions clouding the path to recovery” in the Macau market.
It expects Macau’s 2022 gross gaming revenue (GGR) “to only be 20 percent to 30 percent” of 2019 level, and “50 percent to 70 percent” in 2023.
“Furthermore, we view the timeline of the mass-market recovery to be uncertain due to the ongoing Covid situation and macroeconomic difficulties in China,” added S&P.
Brokerage Sanford C. Bernstein Ltd said in a Monday note it did “not expect” GMM to win “an outright” Macau concession and displace a current veteran of the market in the current public tender process.
But the institution envisaged the Genting group “positioning itself to be a prospective rescuer,” in the event that an incumbent concession holder “experiences financial difficulties and may require a partner”.
