Moody's sees sustained earnings growth for Genting but flags higher debt from NY expansion

• "We project its consolidated capital spending will rise to RM6 billion to RM7 billion per annum in 2024 and 2025 from RM2.8 billion in 2023.”

KUALA LUMPUR (Oct 29): Moody's Ratings has affirmed Genting Bhd’s (KL:GENTING) Baa2 issuer rating and maintained its stable outlook, as it expects the conglomerate to sustain its growth in earnings and cash flows across its business segments over the next 12 to 18 months.

However, the rating agency cautioned that the group’s ambitious expansion plans, particularly in New York, could significantly increase debt and negatively impact its credit rating, according to its statement on Monday.

“Genting has high capital spending amid ongoing expansion works at its Singapore operations and investments in its energy businesses. We project its consolidated capital spending will rise to RM6 billion to RM7 billion per annum in 2024 and 2025 from RM2.8 billion in 2023,” it said.

Moody’s current stable outlook reflects its expectation that Genting's credit metrics will improve in the absence of debt-funded expansion projects, it said.

“Our capex [capital expenditure] projections do not take into account investments associated with a New York license win as it ultimately hinges on the awarding of the license, which remains uncertain at this point,” it explained.

Genting’s indirect subsidiary Genting New York LLC is vying to apply for one of three casino licences in New York. The company has outlined a US$1.1 billion investment by 2026, with an additional US$2.9 billion by 2030 if its application is successful, Moody's noted. Regulatory authorities intend to award the licences by December 2025.

“Genting’s standalone liquidity is excellent, supported by fees and dividend income from its operating subsidiaries and a well-managed debt maturity profile,” it said.

The rating agency also projected that Genting’s adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) to rise by around 4-5% annually in 2024 and 2025 from RM10 billion in 2023, primarily driven by earnings growth at its gaming operations in Singapore and Malaysia, as well as Las Vegas.

On the regulatory complaint pertaining to the group’s operations at Resorts World Las Vegas LLC and a complaint by the minority shareholder of Resort World Bimini in the Bahamas, Moody’s does not expect these to result in significant financial damages and disruptions to operations.

Affirms ratings on Genting Overseas, Genting Singapore

Moody's has also affirmed the Baa2 issuer rating of Genting’s wholly owned Genting Overseas Holdings Ltd (GOHL) and the A3 issuer rating of GOHL's 52.6%-owned unit Genting Singapore Ltd, with a stable outlook.

Moody’s said affirmation of GOHL's ratings reflects a structural subordination risk because of its role as Genting Singapore’s holding company, and the linkage and alignment of its core operations with its parent, Genting.

It also noted that GOHL has no other active businesses apart from Genting Singapore, and relies on dividends from the latter to service its interest expense.

“We believe GOHL's credit quality is capped by Genting. Genting has the ability to extract cash from GOHL and redeploy it to other businesses within the group as needed. Consequently, GOHL is dependent on Genting’s resources to redeem or refinance the principal debt repayment of its US$1.5 billion notes upon maturity in 2027," it said.

The affirmation of Genting Singapore's A3 rating, meanwhile, reflects the company's 100% ownership of the integrated resort Resorts World Sentosa (RWS) and duopoly market position as one of two licensed casino operators in Singapore, supporting its ability to generate strong earnings and cash flows.

“We expect Genting Singapore to generate around S$1.2 billion [RM3.93 billion] of Ebitda in 2024, a modest increase from last year as demand has moderated amid economic uncertainty. At the same time, Genting Singapore's operating capacity has been temporarily reduced because of the closure of a hotel for renovations," it said.

Nonetheless, Moody’s projected that Genting Singapore’s Ebitda to rise to around S$1.3 billion in 2025 as new attractions open in phases and its capacity recovers.

"Genting Singapore is expanding and refreshing its offerings at RWS in phases for a total cost of S$6.8 billion, which includes the amount already spent. Although the amount is significant, the capital expenditure will be spread across multiple years, peaking at an estimated S$1 billion per annum between 2027 and 2029," it noted.

Genting Singapore will likely fund its capital spending using internal cash sources, while its credit metrics and liquidity will remain strong because the company has minimal debt and sizable cash holdings of S$3.7 billion as of June 2024, it added.

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