RAM Ratings has reaffirmed Genting Berhad’s (Genting or the Group) global corporate credit ratings (CCR) of gA2/Stable/gP1.

Published on 04 June 2014

RAM Ratings has reaffirmed Genting Berhad’s (Genting or the Group) global corporate credit ratings (CCR) of gA2/Stable/gP1. Concurrently, we have also reaffirmed the Group’s respective ASEAN and national CCR of seaAAA/Stable/seaP1 and AAA/Stable/P1.
At the same time, we have reaffirmed the AAA(s)/Stable ratings of the RM2.0 billion MTN Programme (2012/2032) and RM1.60 billion MTN Programme (2009/2024) issued by the Group’s wholly-owned subsidiaries, (Genting Capital Berhad (Genting Capital) and GB Services Berhad (GB Services), respectively. As the debt programmes are backed by full, unconditional and irrevocable corporate guarantees from Genting, the enhanced ratings are based on the credit profile of the Group.
Genting’s credit profile is supported by its strong business position in the Malaysian, Singaporean and UK gaming markets. Underpinned by Resorts World Genting’s (RWG) monopolistic position in Malaysia and Resorts World Sentosa’s (RWS) part in Singapore’s gaming duopoly, the Group’s overall operating profit before depreciation, interest and tax margins of 30%-40% are among the highest of gaming groups. Consistent with most global gaming majors which have a significant presence in at least 2 markets, the establishment of casino operations in more than one country alleviates the impact of unforeseen downturns in the macro-economic environment and the risk of adverse regulatory changes in any one country.
Notably, Genting possesses a strong cashflow-generating ability, robust balance sheet and ample liquidity. “The Group’s financial metrics are also superior to that of most global gaming operators,” observes Kevin Lim, RAM’s Head of Consumer and Industrial Ratings. Genting’s net gearing ratio stood strong at 0.08 times as at end-FY Dec 2013, backed by RM18.38 billion of cash and cash equivalents. Nevertheless, amid a more subdued showing by RWS and the plantation segment, as well as significant one-off contributions by the Group in FY 2013 in respect of its social responsibility efforts, Genting’s adjusted funds from operations (FFO) debt cover thinned y-o-y to 0.27 times in FY Dec 2013 (FY Dec 2012: 0.32 times). “Taking into account its planned capex and investments in its new joint-venture project in Jeju, Korea, and the development of Resorts World Las Vegas, Genting is expected to maintain its FFO debt cover ratio at 0.27-0.3 times, with its net gearing ratio at around 0.15-0.3 times,” notes Lim. 
The ratings, meanwhile, are moderated by the Group’s exposure to regulatory risk, its aggressive expansion strategy and the execution risks that this entails. The gaming industry, owing to its sensitive nature, faces regulatory controls that may evolve over time.
We remain cautious over the possible impact of large debt-funded expansions on Genting’s financial metrics. Apart from its recent venture into South Korea, the Group is reportedly eyeing the Japanese market. In the US, the Group is expected to develop an integrated resort in Las Vegas, and possibly in Miami, and has registered its interest in bidding to build a casino in New York State. The Group’s current strong financial metrics may be impacted in the event of an aggressive expansion, although this would depend on the number of new investments and the scale of the projects.
Genting’s overseas expansions also entail considerable execution risks. The concurrent expansion of more than one sizeable project would entail a large demand on resources. Competitive pressures and the challenging operating landscape of new markets may mean lower profitability compared with margins currently enjoyed by RWG and RWS. Nonetheless, we derive comfort from the Group’s strong operational performance in Malaysia and Singapore and its success in turning around and growing the UK operations further.
Genting is the sole licensed casino operator in Malaysia, and one of only 2 in Singapore. It is also one of the largest players in the UK gaming industry and the operator of a casino in the Bahamas and a video lottery terminal facility in New York in the US. Besides its main business of leisure and hospitality, the Group has interests in oil-palm plantations, power generation, property development and oil and gas.

Media contact
Evelyn Khoo
(603) 7628 1075
evelyn@ram.com.my