KUALA LUMPUR: RAM Ratings expects Genting Bhd
’s debts to rise in view of planned capex and investments in major projects in Malaysia, the US and Indonesia but net gearing is anticipated to remain robust.
Genting, with interests in gaming, power and oil and gas, is developing Resorts World Las Vegas, rejuvenating of Resorts World Genting, the construction of a power plant in Indonesia, and oil and gas exploration costs.
The rating agency said on Tuesday that despite the significant increase in debts over the next three years, the group’s net gearing was anticipated to remain robust at between 0.15 times and 0.20 times, despite its funds from operations (FFO) debt cover expected to dip below 0.25 times.
RAM Ratings’ head of consumer and industrial ratings, Kevin Lim said: “Notwithstanding weaker cashflow debt-coverage levels, Genting’s high cash levels are expected to be maintained, while its metrics are anticipated to improve in the medium term.”
RAM Ratings reaffirmed Genting’s global corporate credit ratings (CCR) of gA2/Stable/gP1. It also reaffirmed the group’s respective Asean and national CCR of seaAAA/Stable/seaP1 and AAA/Stable/P1.
It reaffirmed the AAA(s)/Stable ratings of the RM2bil medium-term notes (MTN) programme (2012/2032) and RM1.6bil MTN programme (2009/2024) issued by the group’s units Genting Capital Bhd and GB Services Berhad, respectively.
It said Genting’s credit profile was supported by its strong business position in the Malaysian, Singaporean and UK gaming markets.
The ratings, it said, were moderated by the group’s exposure to regulatory risk, its aggressive expansion strategy and the execution risks that this entails.
“The gaming industry, owing to its sensitive nature, faces regulatory controls that may evolve over time.
“Notwithstanding the very substantial capex lined up over the next three to four years, which is envisaged to be partially debt funded, the group continues to be on the lookout for opportunities to expand, particularly its leisure and hospitality business.
“We remain cautious of the possible impact of large debt-funded expansions on Genting’s financial metrics,” it said.
RAM Ratings noted that Genting’s net gearing ratio remained solid at 0.07 times as at end-FY Dec 2014, backed by RM16.97bil of cash and cash equivalents.
“Genting’s expansion, particularly into new markets, involves considerable execution risks. The concurrent expansion of more than one sizeable project will entail a considerable demand on resources.
“Nonetheless, we derive comfort from the group’s strong operational performance in Malaysia and Singapore, and its success in turning around and growing its UK operations further,” it said.
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