Genting in stronger position
RAM says company’s rejuvenation project has made it more competitive
KUALA LUMPUR: RAM Ratings sees Genting Bhd strengthening its competitive position and improving its performance after completing its RM10.4bil rejuvenation project for its second largest leisure and hospitality (L&H) contributor, Resorts World Genting (RWG).
RAM has reaffirmed Genting’s global corporate credit ratings (CCR) of gA2/Stable/gP1 and its respective Asean and national CCR of seaAAA/ Stable/seaP1 and AAA/Stable/P1.
Concurrently, it reaffirmed the AAA(s)/stable ratings of the RM2bil medium term notes (MTN) Programme (2012/2032) and RM1.60bil MTN programme (2009/2024). The notes were issued by the group’s units Genting Capital Bhd and GB Services Bhd, respectively.
The debt programmes are backed by full, unconditional and irrevocable corporate guarantees from Genting.
Its head of consumer and industrial ratings Kevin Lim said in a statement that the rating reaffirmation was premised on Genting’s better-than-anticipated operating performance and financial metrics in financial year December 2017.
He said RAM expects the group’s credit metrics will remain supportive of its ratings.
“We foresee Genting to take on higher borrowings over the next three years to partially fund its sizeable capex and potentially higher dividend payments, which would result in a weaker financial profile,” he said.
However, he expected Genting to enhance its competitive position and improve its performance after its RM10.4bil rejuvenation project for RWG.
In FY Dec 2017, Genting’s OPBDIT increased by 10.8% year-on-year to RM5.7bil (FY Dec 2016: RM5.1bil), mainly driven by the better showing of its L&H business in Singapore as well as power and plantation divisions.
Within the L&H division, the stronger result from Singapore was partly offset by the lower earnings of its Malaysian operations due to the elevated operating expenses of its new facilities.
“Going forward, we expect Genting’s improvement in OPBDIT to continue.
“Its L&H division is envisaged to benefit from the progressive opening of RWG’s Genting Integrated Tourism Plan (GITP) facilities, allowing it to attract regional patrons,” he said.
Over the next three years (20182020), Genting is expected to incur capex of about RM26bil.
Most of the capex will be spent on the construction of Resorts World Las Vegas, ongoing GITP development and expansion of Resorts World Casino New York City.
“We also expect the Group to pursue higher dividend payments for the next few years,” he said.
RAM also pointed out Genting’s debt load is estimated to peak at about RM36bil by financial year 2020 (end-December 2017: RM27.08bil).
There is limited headroom for further debt expansion without a meaningful increase in contributions from its hefty investments, it added.