RAM Ratings has reaffirmed Genting Berhad’s (Genting or the Group) global corporate credit ratings (CCR) of gA2/Stable/gP1 and its respective ASEAN and national CCR of seaAAA/Stable/seaP1 and AAA/Stable/P1.

Published on 05 October 2016

RAM Ratings has reaffirmed Genting Berhad’s (Genting or the Group) global corporate credit ratings (CCR) of gA2/Stable/gP1 and its respective ASEAN and national CCR of seaAAA/Stable/seaP1 and AAA/Stable/P1. Concurrently, 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 and GB Services Berhad, respectively. The debt programmes are backed by full, unconditional and irrevocable corporate guarantees from Genting.

The reaffirmation of the ratings is premised on Genting’s strong business positions and conservative balance sheet that is anticipated to sufficiently buffer its weakening cashflow debt coverage metrics over the next 3 years as the Group assumes substantially higher debts.

Genting has strong business positions 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) strong foothold in Singapore’s gaming duopoly, the Group’s operating profit before depreciation, interest and tax margins are among the highest of gaming groups. Nonetheless, RWS and the UK segment continue to be challenged by keen competition and a soft VIP market. Meanwhile, contributions from RWG and RWS are relatively well balanced. Coupled with their location in 2 countries, this reduces the Group’s exposure to concentration risk and alleviates the impact of unforeseen downturns in the macro-economic environment or adverse regulatory changes in any one country.

Genting’s debt load of approximately RM25 billion as at end-June 2016 is expected to expand to about RM35 billion by end-FY Dec 2018, mainly to fund considerably heftier capex on the Genting Integrated Tourism Plan and Resorts World Las Vegas. Accordingly, funds from operations debt coverage is envisaged to weaken to a moderate 0.15-0.20 times over the same period. Nonetheless, the Group’s cashflow protection metrics will, in our view, remain relatively strong, supported by large cash reserves relative to its debt load. As Genting is seen to maintain large cash holdings of at least RM20 billion (including liquid money-market funds), its balance sheet is anticipated to stay conservative with a strong liquidity profile. The Group’s net gearing of 0.03 times as at end-December 2015 is expected to rise to about 0.20 times within the next 3 years.

The ratings are moderated by Genting’s aggressive expansion strategy, execution and construction risks as well as the regulatory risk to which the Group is exposed. Genting is in the midst of rejuvenating RWG and developing integrated resorts in Las Vegas, the US and Jeju, South Korea (with a joint-venture partner). Including its investments in the power and plantation divisions, total capex could potentially reach RM22 billion over the next 3 years. In the meantime, the Group is continuously on the lookout for opportunities to expand its leisure and hospitality (L&H) business.

Substantial and concurrent expansions, particularly into new markets, entail significant execution and construction risks. Cost overruns or construction delays would heighten the already considerable demand on Genting’s resources, while setbacks in completion could delay improvement of the Group’s financial profile that we expect upon commencement of the project. Competitive pressures amidst a lower volume of premium punters and a challenging operating landscape may also mean diminished profitability and a longer gestation period. Nonetheless, we derive comfort from the Group’s strong operational performance in Malaysia and Singapore.

Genting is listed on the Main Market of Bursa Malaysia, together with Genting Malaysia Berhad, while its other major subsidiary of Genting Singapore Plc is listed on the Singapore Exchange. Besides its main business of L&H, the Group has interests in oil-palm plantations, power generation, property development and oil and gas assets.

Analytical contact                                        Media contact
Ben Inn                                                          Padthma Subbiah
(603) 7328 1024                                            (603) 7628 1162
ben@ram.com.my                                        padthma@ram.com.my