The “deteriorating situation” in Malaysia regarding Covid-19 is a “credit negative” for Genting Bhd, the parent of a number of casino businesses around the world, says a Thursday note from Moody’s Investors Service Inc.
The outlook in Malaysia “could derail earnings recovery and exacerbate” Genting Bhd’s “already-weak credit metrics,” wrote analysts Junling Tan, Yu Sheng Tay and Vikas Halan.
Moody’s currently rates Genting Bhd as “Baa2 negative”.
Resorts World Genting (pictured) at Genting Highlands – Malaysia’s only casino resort, located near the nation’s capital Kuala Lumpur and run by Genting Malaysia Bhd – is a key earner for the Genting group in terms of gaming and non-gaming entertainment.
Resorts World Genting said in a notice posted recently on its website that it would reduce its operating capacity and temporarily suspend some attractions, following a fresh movement control order imposed on January 11 by the Malaysian government to parts of the country, in order to contain Covid-19.
A “delay in recovery in the Malaysian leisure and hospitality segment, which contributes around 34 percent of Genting Bhd’s consolidated EBITDA [earnings before interest, taxation, depreciation and amortisation], could lead to leverage increasing to around 7.3 times in 2021,” stated the Moody’s analysts.
The ratings house noted the Bursa Malaysia-listed Genting parent had a 49.5 percent stake in Genting Malaysia. “We expect that Resorts World Genting … will receive less visitors because of travel restrictions, social distancing and density control measures, as well as health and safety concerns,” it added.
Moody’s nonetheless said it expected Genting Bhd’s “excellent consolidated liquidity” – as of September 30, MYR29 billion (US$7.19 billion) in cash and equivalents, and gross balance sheet debt of MYR38 billion – to “support its ability to weather the temporary deterioration of earnings”.
The analysts added: “Genting Bhd’s operating cash flow of around MYR4.5 billion over the next 15 months will be sufficient to cover an estimated capital spending and investment of around MYR13 billion and an estimated dividend payout of around MYR2.6 billion.”
