The outlook for the casino gaming industry in Singapore and Malaysia continues to be “stable”, says a note from Fitch Ratings Singapore Pte Ltd.
The ratings house cited “robust” margins on earnings before interest, taxation, depreciation and amortisation that were “in excess of 30 percent” at the two Singapore resorts – Marina Bay Sands (pictured) developed by Las Vegas Sands Corp; and Resorts World Sentosa, operated by Genting Singapore Plc – and at Malaysia’s only casino property, Resorts World Genting, operated by Genting Malaysia Bhd.
Fitch said it had formed its view despite declining visitor arrivals in Singapore and lower win rates for Resorts World Sentosa and Genting Resorts World Genting, especially in the VIP segment.
The total number of tourists visiting Singapore fell 3.4 percent year-on-year in the six months to June 30, the Singapore Tourism Board announced on August 25. But the number of tourists from mainland China visiting Singapore rose by 8.9 percent year-on-year during the period. Mainland tourists are a key consumer target group for neighbouring Asian countries and for regional casino operators because of their hitherto strong appetite for spending.
Malaysia’s tourism industry is also trying to woo more mainland Chinese visitors. Samuel Yin Shao Yang, from Malaysia’s Maybank IB Research, said in a note on August 27 that the Malaysian Association of Tour and Travel Agents had met the country’s prime minister, Najib Razak, that day to lobby for a visa waiver policy for individual visitors from mainland China.
Fitch said in its note that in terms of balance sheet fundamentals, the two Genting units operating casinos in – respectively – Singapore and Malaysia, had net cash and that Marina Bay Sands was reducing the proportion of its debt.
“Genting Singapore and Genting Malaysia are in a net cash position, while Marina Bay Sands Pte Ltd has been deleveraging,” stated Fitch, referring to the Las Vegas Sands unit operating Marina Bay Sands.
The ratings firm noted however that the due date on “receivables” – a reference in this context to monies owed on losses made by VIP gamblers playing on credit advanced to them – was high at all three resorts.
“’Days receivable’ continue to be high at over 100 days, as Genting Singapore and Marina Bay Sands extend credit directly to their VIP patrons. Genting Malaysia [Resorts World Genting] is a mid-market-focused integrated resort, whose ‘days receivable’ have doubled to 44 days in the second quarter of 2015 since the first quarter of 2014,” stated Fitch.
The ratings firm ranked Genting Bhd, the holding company of Genting Singapore and Genting Malaysia, as “A-“ and “stable”.
Fitch said that while the Genting parent had “substantial expansion plans in 2015 and 2016” it did not expect it to have an adverse effect on Genting’s credit profile, “as the company proposes to fund this through a combination of debt and cash”.
Morgan Stanley Asia (Singapore) Pte said in recent note it preferred Genting Bhd over its Genting Malaysia Bhd casino unit because of the parent’s greater diversity of business interests and its relatively undemanding share valuation.
