Malaysia: Genting downgraded to negative

RAM Ratings has downgraded Genting Berhad and Genting Malaysia Berhad’s outlooks from stable to negative.

Malaysia.- RAM Ratings has downgraded Genting Berhad and Genting Malaysia Berhad from AAA to AA1.

RAM said its outlook had changed from stable to negative due to the impact of the Covid-19 pandemic and related controls.

According to RAM, the ratings reflect a high degree of uncertainty for both companies amid the ongoing pandemic. It does not expect Genting to see a return to pre-pandemic results for at least two years.

RAM said: “We envisage severe revenue contraction for Genting (relative to 2019 levels) until at least 1H21.

“Its earnings are only likely to be restored to pre-crisis levels in 2022 at the earliest – against our initial expectation that they would mostly normalise by 2021. Although the Group has implemented cost optimisation measures, these are unlikely to fully mitigate the impact on its earnings”.

It added: “After the plunge in fiscal 2020, Genting’s operating profit before depreciation, interest and tax is envisaged to stay below pre-crisis levels in fiscal 2021 amid a tepid recovery in business volumes.”

According to analysts, Genting’s net gearing ratio is projected to deteriorate around 0.35 times by December 2022.

RAM said: “Its credit metrics are no longer consistent with its previous AAA ratings”.

“The negative effects of the Covid-19-induced economic slowdown on consumer income and wealth will constrain discretionary spending on gaming and leisure activities.

“Concurrently, lingering fear of the coronavirus may affect travel plans and impede patronage. These repercussions are likely to persist even after the health crisis subsides and travel restrictions are relaxed.”