Earnings before interest, taxation, depreciation and amortisation (EBITDA) at casino operator Genting Singapore Ltd are likely to remain below 2019 levels this year and in 2022. That is according to a new credit opinion on the company issued on Thursday by Moody’s Investors Service Inc.
“Following a challenging year, we estimate Genting Singapore’s EBITDA to increase in 2021 and 2022 but remain below pre-pandemic levels,” analysts Junling Tan, Yu Sheng Tay, and Vikas Halan wrote. “We believe the operating environment will remain challenging, as ongoing international travel restrictions [related with the Covid-19 pandemic] continue to weigh on recovery prospects”.
Moody’s forecast Genting Singapore is likely to achieve revenue of almost SGD1.74 billion (US$1.30 billion) in full-2021, up by almost two-thirds in year-on-year terms. Revenue in full-2022 is likely to hit close to SGD2.11 billion, the credit rating agency estimated.
Genting Singapore is the operator of Resorts World Sentosa, one of Singapore’s two casino resorts. The firm is a subsidiary of Malaysian conglomerate Genting Bhd.
Moody’s said in its note that Genting Singapore had “maintained a net cash position since 2010, providing the company with a good buffer to withstand weak operating performance caused by the coronavirus pandemic.”
The credit rating agency pointed out that the casino operator had “sufficient resources” to fund the previously-announced expansion of Resorts World Sentosa, involving a capital expenditure budget of SGD4.5 billion. A spending commitment of that amount was made respectively by Singapore’s two casino resort operators – the other being Las Vegas Sands Corp, promoter of Marina Bay Sands – in April 2019, as the Singapore government said it would extend the duopoly rights of the two operators until 2030.
“Given Genting Singapore’s sizable cash position, it is likely to have sufficient resources to fund the expansion without incurring additional debt,” Moody’s said.
In the note, the agency said its current ‘A3’ issuer rating for Genting Singapore took into consideration the firm’s duopoly market position. The investment-grade rating also reflected Genting Singapore’s “excellent liquidity, with a history of a strong net cash position, which helps to buffer against the weak operating environment as international travel remains restricted.”
Moody’s however has a ‘negative’ outlook on Genting Singapore’s rating. It said in its Thursday note such outlook reflected “the uncertainty surrounding the pace at which operating performance at Resorts World Sentosa will recover” from the negative impact of the Covid-19 pandemic.
The credit rating agency stated that the pandemic had highlighted the “vulnerability of Genting Singapore’s geographic concentration risk,” as the firm only has operations in one location. “Such geographic concentration also exposes Genting Singapore to economic cycles and increased competition in the region, as well as potential regulatory changes in Singapore,” Moody’s added.
The credit rating agency noted that the casino operator was evaluating the conditions and the investment environment for a potential Yokohama integrated resort project. The company obtained shareholders’ approval in February 2020 to submit one or more bids for a Japan integrated resort, with an investment amount of up to US$10 billion.
“Given the ongoing expansion of Resorts World Sentosa, we expect Genting Singapore’s financial flexibility for expanding into Japan to be reduced,” Moody’s said. “While the timing and scale of such investments ultimately hinges on the awarding of a Japanese licence, which remains uncertain at this point, a debt-funded expansion into Japan will weaken the company’s credit quality,” it added.
