Credit ratings agency Fitch Ratings has reaffirmed the long-term foreign-currency issuer default rating (IDR) and unsecured rating of “A-” held by casino operator Genting Berhad thanks to its “strong market position” in Singapore and Malaysia.
In addition to being responsible for the Genting Casino and Genting Club chains in the United Kingdom, Kuala Lumpur-based Genting Berhad operates the giant Resorts World Sentosa in Singapore while its Malaysian properties include Resorts World Genting and Resorts World Kijal.
Fitch Ratings additionally reconfirmed the “A-” foreign and local currency IDR grade held by the Malaysian firm’s majority-owned Genting Singapore subsidiary while declaring that its $1.71 billion in perpetual capital securities were rated at “BBB” with a “stable” outlook.
“Genting’s ratings reflect its continued strong market position in the Malaysian and Singaporean gaming markets and meaningful diversification in the plantations and energy sectors,” read the determination from Fitch Ratings. “The ratings also reflect the company’s conservative financial policies.”
The determination from Fitch Ratings explained that 45% of Genting Berhad’s 2014 earnings before interest, tax, depreciation and amortization came from Genting Singapore. It stated that such “sharing of brands” and “history of providing financial support” were key attributes in its decision to equalize the ratings.
Fitch Ratings disclosed that Genting Berhad’s leisure and hospitality business, which includes casinos, hotels and theme parks, saw its first-quarter earnings before interest, tax, depreciation and amortization margin fall by almost 8% year-on-year to 34.8% with gaming profitability margins also down although the firms’ overall profitability is “consistent with its rating”.
The ratings firm stated that Genting Singapore had been affected by the 5.4% first-quarter drop year-on-year in visitors to Singapore, which was due to “the macroeconomic slowdown and anti-corruption crackdown in China along with the depreciating Indonesian rupiah and the uncertainty in global markets”. As a result, the operator is seeing almost half of its gross gaming revenues come from the VIP market.
“With the declining trend in tourist inflows since the second half of 2014, Fitch Ratings expects the Singapore operation’s gross gaming revenues to either stagnate or shrink slightly,” read the report from Fitch Ratings. “Despite Genting Singapore’s earnings before interest, tax, depreciation and amortization declining to 36% for the first quarter of 2015 from 48.5% in the first quarter of 2014, it continues to be healthy. Genting Singapore is in a net cash position.”