Fitch has lowered its revenue projections for Genting Malaysia, the operator of Resorts World Genting in Malaysia, as well as casinos in New York and Europe, by an average of approximately 5% for the years 2023 and 2024. The rating agency cited a slower-than-expected recovery in the first half of the year as the reason for this adjustment.
According to a report from Inside Asian Gaming on September 22, Fitch has maintained Genting Malaysia’s Long-Term Issuer Default Rating (IDR) at “BBB” with a stable outlook and affirmed a “BBB” rating on the company’s $1 billion (RM4.69 billion) unsecured notes due in 2031. This decision is based on a strong domestic outlook and the support from its diversified parent company, Genting Bhd.
Fitch described Genting Malaysia’s IDR as being “equalised” by its 49% stronger parent, noting that revenue in 2022 and the first half of 2023 from Malaysia’s Resorts World Genting, which contributes over 60% of Genting Malaysia’s consolidated earnings, fell below expectations due to factors such as heavy rainfall at the beginning of 2023 and a landslide in late 2022 that hindered access to the resort.
As a result of these challenges, Fitch has adjusted its revenue expectations for 2023 and 2024 to approximately 90% to 95% of the 2019 levels, down from the previous estimate of around 95% to 100%. Fitch anticipates that revenue growth will be driven by a gradual increase in domestic visitors and higher international tourism, supported by the likely repair of the access road by the first half of 2024.
While Fitch maintained Genting Malaysia’s ratings, the agency has placed the “BBB-” IDR of Genting New York LLC, a wholly-owned subsidiary, and the “BBB-” rating on its $525 million senior unsecured notes due in 2026 on Rating Watch Negative (RWN). This decision is influenced by the ongoing bidding process for a full-scale casino license in downstate New York.
Fitch explained that if Genting New York does not secure the casino license, its strategic importance to the Genting group and the incentives for support from Genting Bhd could weaken, potentially leading to a downgrade of Genting New York’s IDR by more than one notch.
However, if Genting does win the New York license, it would gain access to a substantial market, enhancing Genting Malaysia’s geographic diversification and potentially lowering the tax rate on Genting New York’s gross gaming revenue, which currently stands at around 65%.
Fitch emphasised that Genting Malaysia’s rating is closely linked to Genting’s IDR due to “high” strategic and operational incentives for support. The agency expects Genting Malaysia to continue contributing over 30% of Genting’s proportionately consolidated Ebitdar (earnings before interest, taxes, depreciation, amortisation, and rent/restructuring). Additionally, Genting Malaysia’s subsidiary, Genting New York, is well-positioned to secure a license in New York City, which would drive significant growth for the group. This alignment is underpinned by the common Resorts World brand, substantial management overlap, and the Resort Management Agreement with a Genting subsidiary for Genting Malaysia’s operations in Malaysia, for which a fee is paid.
