SINGAPORE: Moody’s Investors Service has affirmed the Baa1 issuer rating of Genting Bhd with a stable outlook.
The rating affirmation reflected Moody’s expectation of a stable consolidated cash flow generation from the group’s monopoly gaming operation in Malaysia and duopoly gaming operation in Singapore.
It also reflected the group’s track record of maintaining excellent consolidated liquidity with sizable holdings of cash-on-hand and a well-managed debt maturity profile.
“Genting’s credit metrics will weaken over the next 12-18 months owing to our expectation of higher debt-funded capital spending for the group’s ongoing re-development of Resorts World Genting and the construction of Resorts World Las Vegas, but remain supportive of its Baa1 issuer rating,” said Moody’s Vice-President and Senior Credit Officer Jacintha Poh in a statement today.
“Nonetheless, Genting has limited headroom to accommodate an increase in debt until construction of Resorts World Las Vegas completes and the new integrated resort starts contributing to the group’s earnings, which is unlikely to be before 2021,” added Poh, who is also Moody’s Lead Analyst for Genting.
Moody’s expected Genting’s capital spending to rise significantly to around RM9 billion per annum in 2019 and 2020, from RM3.9 billion in the 12 months ended Sept 30, 2018.
As of Sept 30, 2018, Genting maintained a sizeable cash position of RM29 billion compared with a gross balance sheet debt of RM27 billion.
However, over 65 per cent of the group’s cash are held in three majority-owned and listed subsidiaries – 53 per cent-owned Genting Singapore Limited, 49 per cent-owned Genting Malaysia Bhd and 52 per cent-owned Genting Plantations Bhd – therefore limiting its ability to access the funds in their entirety.
Moody’s expected Genting to generate an annual operating cash flow of around RM5.5 billion over the next 12 months, more than sufficient to cover short-term debt repayments of RM1.9 billion, anchoring the group’s excellent consolidated liquidity position.
The outlook on the rating is stable, reflecting Moody’s expectation that Genting would exercise financial prudence during its current expansion phase and would maintain strong financial flexibility with ample liquidity reserves.