S&P downgrades Genting on slow recovery in Asia

Aug 25, 2021 Newsdesk Latest News, Rest of Asia, Top of the deck  

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S&P Global Ratings has downgraded its credit ratings for the Genting group of companies, on sluggish recovery prospects because of the Covid-19 pandemic.

The more infectious Delta variant of the virus “has triggered lockdowns and heightened social restrictions, materially affecting Genting’s leisure and hospitality operations in Southeast Asia, especially in Malaysia and resulting in further delays in the recovery of the group’s earnings,” said the institution in a note on Friday.

The rating agency downgraded the long-term issuer ratings on Genting Bhd to “BBB-” from “BBB”, considered a ‘speculative grade’. The company, via its subsidiaries, provides leisure and hospitality, gaming, and entertainment services, among other businesses.

S&P also downgraded the long-term issuer rating on Genting Malaysia Bhd to “BBB-” from “BBB”. The unit has a monopoly single-casino licence in Malaysia to operate Resorts World Genting, and runs gaming venues in the United States and the Bahamas, as well as the United Kingdom and Egypt.

Resorts World Genting temporarily closed its casino from May 24 until further notice, because of a movement control order introduced by the national government. The property’s promoter subsequently announced on May 31 that the whole of the complex was to be temporarily shut.

Maybank Investment Bank Bhd said in a recent note that it assumed that Resorts World Genting would “be shut for another two months,” or five months in total.

Another of Genting group’s units, Resorts World Las Vegas LLC was downgraded to “BB+” from “BBB-”. The subsidiary launched on June 24 the US$4.3-billion Resorts World Las Vegas casino resort, in Nevada, United States.

The note did not mention a rating for Genting Singapore Ltd, the unit that runs the Resorts World Sentosa in Singapore, and that was in the run for a casino resort licence in Japan’s Yokohama city.

An integrated resort (IR) in Yokohama is likely not happening, after Takeharu Yamanaka won the city’s mayoral election on Sunday, campaigning on an anti-IR agenda, according to a number of investment analysts.

In a follow-up online presentation on Tuesday, the S&P analysts said their assessment of the Genting group had “never considered the Japan investment”.

“We haven’t reflected any kind of assumption [for a Japan project] in our base case scenario because of the low visibility, and the risk associated with it,” stated analyst Shawn Park. “The scrapping of the IR project in Japan, in our view, is quite indifferent to our underlines on the Genting group.”

In the note, the institution said: “Given the ongoing uncertainties surrounding the Delta variant and a slower-than-expected operational recovery in the [Southeast Asia] region, we now expect Genting group companies’ earnings before interest, taxation, depreciation and amortisation to reach pre-pandemic levels only in 2023, from the previous 2022.”

Nonetheless, S&P revised its outlook for the group to stable from negative. It said the action reflected the institution’s “expectation that the group’s credit quality will stabilise, following the completion of a major investment cycle, while an operational recovery takes shape over the next two years as vaccination rates [against Covid-19] increase in its key markets.”

In the online presentation, Mr Park said the institution expected Genting group’s investment commitments “to be more than halved,” and that it anticipated a “notable contribution” from the new Las Vegas property “next year”.

“This will further cushion any downside risk from Covid-19, and as a result we believe a stable outlook better explains the outlook of the company,” he added.

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