Higher du­ties to weigh on Gent­ing’s ebitda: Moody’s

> In­crease in casino levies, annual fee credit nega­tive but group re­mains within Baa1 rat­ing pa­ram­e­ters

The Sun (Malaysia) - - SUNBIZ -

PETAL­ING JAYA: Gent­ing’s Bhd earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion (ebitda) is ex­pected to de­cline by around RM650 mil­lion in 2019 un­der a stressed sce­nario, where casino du­ties of ad­di­tional 10% on gam­ing rev­enue start from Jan 1, 2019, said Moody’s In­vestors Ser­vice.

The rat­ing agency said the in­crease in taxes, fees and levies in the gam­ing in­dus­try an­nounced in Bud­get 2019 is credit nega­tive for the group as the changes, par­tic­u­larly the in­crease in casino du­ties of up to 35%, will cause a de­cline in earn­ings con­tri­bu­tion from its Malaysia leisure and hos­pi­tal­ity seg­ment and con­se­quently weaken its lever­age.

Gent­ing cur­rently pays casino du­ties of up to 25% on gam­ing rev­enue.

Moody’s also said the group will be af­fected by higher casino li­cence fee (from RM120 mil­lion to RM150 mil­lion per year) and higher ma­chine dealer’s li­cence (from RM10,000 to RM50,000 per year).

The rat­ing firm noted that the ex­pected de­cline in Gent­ing’s ebitda will erode the likely ini­tial gains as a re­sult of the com­ple­tion of its Gent­ing In­te­grated Tourism Plan (GITP) at Re­sorts World Gent­ing.

GITP, which com­menced in 2013, is a de­vel­op­ment that will en­hance Re­sorts World Gent­ing with ad­di­tional food and bev­er­age of­fer­ings, and en­ter­tain­ment and re­tail ar­eas; a new in­door theme park; and re­build­ing of the out­door theme park as a 20th Cen­tury Fox World theme park.

While Gent­ing’s credit met­rics are pro­jected to weaken, Moody’s said it is still within the Baa1 rat­ing pa­ram­e­ters.

“Lever­age, as mea­sured by debt/ebitda will likely in­crease to 3.8 times in 2019, from 3.5 times in 2018, while re­tained cash flow will likely weaken to 12% from 13% over the same pe­riod.”

Moody’s added that there is lim­ited head­room to ac­com­mo­date an in­crease in debt un­til con­struc­tion of Re­sorts World Las Ve­gas (RWLV) com­pletes and the new in­te­grated re­sort starts con­tribut­ing to the group’s earn­ings.

Ground-break­ing of RWLV took place in May 2015 and its first phase of de­vel­op­ment is un­der way with the com­ple­tion tar­geted for 2020. The com­pleted pro­ject will in­clude four tow­ers to­tal­ing 6,583 ho­tel rooms.

The re­sort will be Gent­ing’s first in Ne­vada. It also op­er­ates re­sorts in Malaysia, Sin­ga­pore, South Korea, the United King­dom and the Ba­hamas, ac­cord­ing to its web­site.

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