Fitch ups revenue forecast for GEN Malaysia on travel uptick

Sep 19, 2024 Newsdesk Latest News, Rest of Asia, Top of the deck  

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Fitch Ratings Inc says it has “raised” its 2024 and 2025 revenue forecast for casino firm Genting Malaysia Bhd, expecting the company to achieve “up to 100 percent of the 2019 level,” the last trading year immediately prior to the Covid-19 pandemic.

“We expect higher revenue on a domestic traffic rebound and increase in international tourists as regional travel continues to recover, helped by the completion of repairs to an access road to Genting Highlands in July 2024,” said the ratings agency in a Wednesday report.

Genting Malaysia operates Resorts World Genting (pictured in file photo), at Genting Highlands in Pahang State, Malaysia’s only licensed casino property. The group also runs casinos in the United States – via associated businesses – and in the Bahamas, the United Kingdom, and Egypt.

On Wednesday, Fitch affirmed Genting Malaysia’s long-term issuer default rating at “BBB”, with a “stable” outlook.

The institution said it expects the casino firm to achieve a revenue compound annual growth rate (CAGR) of 4 percent between 2024 and 2026, and an “average annual Fitch-adjusted” earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of “27 percent” over the same period.

Genting Malaysia’s first-half revenue from the gaming and leisure business in its home country rose by 14 percent year-on-year “on a recovery in travel demand,” and accounts for over 60 percent of the group’s consolidated revenue in the period, noted Fitch.

“As a result, we raised our revenue forecast [of Genting Malaysia] for 2024 and 2025 to up to 100 percent of the 2019 level. We expect higher revenue on a domestic traffic rebound and increase in international tourists as regional travel continues to recover, helped by the completion of repairs to an access road to Genting Highlands in July 2024,” Fitch Ratings said.

In full-year 2023, Genting Malaysia’s revenue increased by 18.4 percent year-on-year, to MYR10.19 billion (US$2.40 billion currently), while adjusted EBITDA grew by 24.4 percent to MYR2.63 billion. Revenue for full-year 2019 was nearly MYR10.41 billion, with adjusted EBITDA of MYR2.64 billion.

Fitch said in Wednesday’s commentary that it expects Genting Malaysia’s average annual capital expenditure to be about MOP950 million over 2024 to 2026, along with an average annual dividend outflow of MYR1 billion across those three years.

“We expect Genting Malaysia’s EBITDA net leverage to drop to around 3.0 times by 2026, from about 4.0 times in 2023 on higher EBITDA growth,” stated the ratings agency.

Genting Malaysia has “healthy liquidity”, with cash and cash equivalents of MYR5.4 billion as at June-end, against short-term borrowings of around MYR2.1 billion, Fitch remarked. The group’s next “major” debt maturities are in 2027, totalling around MYR1.1 billion and comprising medium-term notes at its Malaysian financing subsidiary, it added.

The long-term issuer default rating of Genting New York LLC – a wholly owned subsidiary of Genting Malaysia – was affirmed at “BBB-”, the same rating as for its US$625-million senior unsecured notes due in 2029, said Fitch. Both remain on the rating agency’s “rating watch negative” (RWN).

“The RWN will be resolved once it is confirmed that Genting New York has won a full-scale casino licence in downstate New York, or if it is out of contention. The RWN may not be resolved within the next six months, as the bid process may take longer to conclude,” Fitch said.

It added: “Should Genting New York win the licence for a full-scale casino in New York City, we expect Genting New York and Genting Malaysia to partly rely on new debt to finance the associated capital expenditure, such that there is no material impact on Genting Malaysia’s liquidity.”

Genting New York has announced plans to invest up to US$5 billion if it gets one of the three likely downstate New York casino licences.

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