Moody’s Investors Service says it expects earnings for Genting Singapore Ltd to recover, and the firm’s credit metrics to “remain strongly positioned” as the Singapore casino market recovers from the Covid-19 pandemic.
The gaming firm’s rating however “is constrained by the parent’s credit quality,” said the ratings agency in a credit opinion issued on Wednesday.
Genting Singapore operates one half of Singapore’s casino duopoly, via the Resorts World Sentosa complex (pictured). The company is part of Malaysia-based conglomerate Genting Bhd.
Moody’s said it expects Genting Singapore’s earnings before interest, taxation, depreciation and amortisation (EBITDA) to increase to about SGD630 million (US$443.0 million) in 2022, and rise to SGD930 million next year. The company reported adjusted EBITDA of SGD448 million in full-year 2021.
“The improvement reflects the ongoing recovery in operating performance following the lifting of border restrictions in April this year, although earnings are unlikely to return to the 2019 levels until 2024-25,” wrote the Moody’s team.
“Genting Singapore is dependent on Singapore’s tourism sector, which has seen recovery this year but visitor arrivals in August 2022 remained at around 40 percent of the 2019 levels,” stated the memo. “At the same time, the company faces cost pressures from rising utilities and labour costs, as well as increased casino tax rates since March 2022,” it added.
According to Moody’s, Genting Singapore’s credit metrics “will remain strong, driven by its net cash position,” and the company “will become debt-free following the maturity of its SGD206-million Japanese yen-denominated bonds in October.”
Despite that background, Genting Singapore’s credit quality “is constrained” by that of its parent Genting Bhd. “There are links between the two entities, given that Genting Singaporehas historically been the largest contributor of earnings to Genting Bhd and holds most of the group’s consolidated cash balance,” said the ratings agency.
Genting Singapore has a ‘A3’ issuer rating from Moody’s. Long-term obligations rated A are considered “subject to low credit risk”. The casino operator is investing SGD4.5 billion in the expansion of Resorts World Sentosa, as part of the extension of its casino licence until 2030.
“The preparation for the expansion is in progress, and we expect the company to incur SGD1.4 billion of capital spending over the next 18 months,” stated the institution in its Wednesday note.“Given Genting Singapore’s sizable net cash position, it is likely to have sufficient resources to fund the expansion without incurring additional debt.”
