A 50-percent cap on customer capacity at the Resorts World Genting casino complex in Malaysia is likely to “remain in place at least until the first quarter 2022,” says a Thursday note from Fitch Ratings Inc.
But it added there was some cause for optimism on global casino earnings for Genting Bhd, the parent of that resort’s promoter Genting Malaysia Bhd. That was on the basis of rising vaccination rates in the group’s operational markets; 50-percent lower capital expenditure (capex) from 2022; and its venues in the United States leading the industry’s recovery path.
Fitch rates the Genting parent as ‘BBB’ with a ‘negative’ outlook. Such a rating from the institution indicates “expectations of default risk are currently low”.
Aside from Malaysia, Genting Malaysia has investment in casino business in the Bahamas, the United Kingdom, and Egypt, as well as the U.S..
Genting Singapore Ltd promotes the Resorts World Sentosa gaming complex, one half of a casino duopoly in Singapore. Another of the group’s units, Genting Hong Kong Ltd, runs a loss-making casino cruise business.
Fitch analysts Erlin Salim, Akash Gupta and Colin Mansfield, said the Genting parent was “on track” to deleverage to “below 3 times by end-2023,” even though earnings before interest, taxation, depreciation and amortisation (EBITDA) from its primary markets in Singapore and Malaysia were “unlikely to recover to pre-pandemic levels until 2024”.
They added: “Our expectations for deleveraging are supported by gradual recovery in Malaysia and Singapore,” and “swift recovery in Genting’s U.S. markets, combined with lower capital expenditure from 2022”.
Fitch observed that Genting Malaysia had made efforts to streamline its operations and cut costs in response to the current lower visitor volumes, via steps including reducing its workforce and “introducing more automation and digitalisation”.
The institution noted: “These efficiency efforts helped to reduce the cash burn rate during a closure in 2021 by around 40 percent compared with 2020.”
Resorts World Genting – Malaysia’s only casino resort – reopened on September 30 a number of facilities to the public, including the Genting Casino.
The firm had announced on May 31 that the whole of the complex was to be shut temporarily, due to an uptick in Covid-19 infections in Malaysia.
Banking group Nomura said in a Wednesday memo that Malaysia was likely to admit “select international tourists soon”, due to the “high vaccination rate amongst locals,” and that should be a positive for Resorts World Genting.
Fitch said on Thursday, that while it thought a 50 percent capacity limit at the property was likely to stay until early next year, there was likely to be a gradual relaxation of restrictions in Malaysia “once Covid-19 is deemed endemic”.
The Fitch analysts stated: “This expectation is in line with decisions made by other countries, such as the United States and the United Kingdom, to remove capacity limits.”
