Fitch Ratings says Genting Malaysia outlook remains stable

Fitch Ratings has affirmed Genting Malaysia’s long-term issuer default rating at BBB.

Malaysia.- Fitch Ratings has upheld its credit rating of BBB for Genting Malaysia. However, it has adjusted the company’s standalone credit profile (SCP) from BBB to BBB-, accompanied by a stable outlook. Fitch has placed the BBB- rating of Genting Malaysia’s wholly owned subsidiary, Genting New York LLC, on “rating watch negative.”

Fitch forecasts that the casino firm’s earnings before interest, taxation, depreciation, amortisation and rent (EBITDAR) net leverage ratio, including Empire Resorts, will remain above 3.5 times until 2025.

Genting Malaysia operates Resorts World Genting, which is the only licenced casino in Malaysia. The group also manages casinos in the United States, the Bahamas, the United Kingdom and Egypt. It has an affiliation with Empire Resorts which runs Resorts World Catskills in upstate New York.

Fitch analysts Akash Gupta, Shiv Kapoor, and Hasira De Silva noted: “Genting Malaysia’s revenue rebound has been slower than our expectations, and the impact on leverage has been compounded by Empire’s weak metrics.” 

They said this development should have a limited impact on parent company Genting Bhd as it has significantly higher cash flow diversification compared to Genting Malaysia.

Fitch pointed out that unexpected factors, such as heavy rainfall at the beginning of 2023 and a landslide in late 2022, affected revenue in Malaysia, which constitutes over 60 per cent of Genting Malaysia’s consolidated revenue. They have adjusted their revenue projections for 2023 and 2024 to around 90 per cent to 95 per cent of the 2019 level.

Looking ahead, Fitch anticipates that revenue growth will be driven by a steady increase in domestic traffic and a rise in international tourists, supported by the anticipated repair of the access road by the first half of 2024. 

In the United States, revenue is expected to remain static, while in the UK, Genting Malaysia may face weak domestic demand and cost pressures, resulting in a forecast revenue decline in 2023 before a potential recovery in 2024.

Fitch noted that Genting New York intends to bid for one of three full-scale downstate New York casino licences, likely to be awarded by the first half of 2024. However, the “rating watch negative” status on Genting New York’s ratings takes into account the possibility that it may not secure a licence, which could weaken its strategic importance and incentives for support from Genting Bhd, potentially leading to a downgrade of more than one notch.

Genting Malaysia reported that revenue was up 166 per cent year-on-year to MYR2.18bn (US$486.5m) in the second quarter. The company said the improvements were primarily due to an overall higher volume of business at Resorts World Genting (RWG) as a result of the eased travel restrictions in the country.