High vaccination rates in Singapore, Malaysia and the US, as well as moderating capex are key to Genting Berhad’s (Genting, BBB/Negative) recovery, Fitch Ratings says in a new report.
Fitch expects Genting to deleverage to 4x in 2022 and 3x 2023 in a scenario of gradual recovery, aided by lower capex from 2022 and strong rebound in the US gaming market. The Negative Outlook on Genting’s rating highlights the risk of slower-than-expected recovery as its key markets in Singapore and Malaysia transition to living with Covid-19.
Fitch believes the next six to nine months are pivotal for the sector as it expects governments to provide clearer indications of their border and travel policies, which are key to determine if casinos and tourism can gradually return to normal, or if visitor volumes are unlikely to return to pre-pandemic levels.
The report outlines Fitch’s recovery expectation for Genting Malaysia Berhad (GENM, BBB/Negative) and Genting Singapore PLC (GENS, unrated), and how each company tackles low visitor volumes to defend cash flows. It also highlights Resorts World Las Vegas LLC’s (RWLV, BBB/Negative) strong performance to date, which will help Genting’s EBITDA to recover to pre-pandemic levels and the group to deleverage in line with its expectations.
A prolonged lockdown in Malaysia after a resurgence in Covid-19 infections slowed Genting Malaysia Berhad’s (GENM, BBB/ Negative) recovery in 2021, but it expects visitor volumes to pick up as interstate travel was allowed to resume in October 2021. This is in line with the sharp recovery seen in 3Q20, after the country reopened following a strict lockdown in 2Q20. The ban on interstate travel, in place since January 2021, was lifted after the Malaysian Prime Minister said 90% of the adult population has been fully vaccinated. Progressive lifting of restrictions should support operating stability at GENM. Fitch also expects the new outdoor theme park at Resorts World Genting to draw additional traffic and contribute to its recovery.
In August to September 2020, GENM’s gross gaming revenue (GGR) recovered sharply to around 80% of the 2019 level and hotel occupancy rose to around 90% of available capacity when interstate travel restrictions were lifted. However, GGR fell to 40%- 50% of 2019 level in subsequent months when travel restrictions were re-imposed amid surging infections
