Fitch Affirms Genting Berhad and Genting Singapore at 'A-'/Stable

Sunday 5th of July 2015

A view of the exterior of the Resorts World Sentosa development on Singapore's Sentosa Island

Fitch Ratings has affirmed Malaysia-based gaming conglomerate Genting Berhad's Long-Term Foreign Currency Issuer Default Rating and senior unsecured rating at 'A-'. Fitch has also affirmed the Long-Term Foreign and Local Currency IDRs of Genting Singapore PLC at 'A-’. The Outlooks for Genting and GENS are Stable.

Genting's ratings reflect its continued strong market position in the Malaysian and Singaporean gaming markets and meaningful diversification in the plantations and energy sectors, Fitch says, along with the company's conservative financial policies.

GENS's ratings are equal to Genting's due to the strong strategic and operational ties between the two entities, with GENS contributing about 45 percent of Genting's consolidated EBITDA in 2014. Sharing of brands and a history of providing financial support are also key attributes for the equalisation of the ratings.

The ratings company said it factored in the effect Macau’s downturn is having on the businesses.

“Genting's flagship gaming business has been moderately affected over the last 12 months by a combination of lower volumes and win rates across its properties. GENS' gaming and non-gaming revenues declined due to the continued weakness in the premium gaming market.” “In Malaysia, though gross gaming revenues (GGR) increased, lower win rates in the premium players business, and higher payroll costs and costs relating to the premium players business resulted in a lower EBITDA.”

As expected, the weakness in the gaming business led to Genting's leisure and hospitality EBITDA margin falling to 34.8 percent as at 15Q1, from 42.7 percent in 14Q1. While Genting's gaming profitability margins have fallen, the overall profitability is consistent with its rating.

GENS has also faced fewer tourist arrivals due to the macroeconomic slowdown and anti-corruption crackdown in China, along with the depreciating Indonesian rupiah and the uncertainty in global markets. Tourist arrivals to Singapore between January and April 2015 were 5.4 percent lower than the same period last year.

“With the declining trend in tourist inflows since 2H14, Fitch expects the Singapore operation's GGR to either stagnate or shrink slightly. Despite GENS's EBITDA margin declining to 36% 1Q15 from 48.5% in 1Q14, it continues to be healthy. GENS is in a net cash position.”