Moody's: Gaming sector can withstand temporary cash burn

KUALA LUMPUR: The gaming sector continues to be hard-hit by the Covid-19 pandemic but most operators can withstand temporary cash burn, says Moody's Investors Service.

In a sector in-depth report, Moody's said falling international travel, property closures and the ongoing social distancing measures would keep the gaming sector’s prospects weak until at least 2021.

"We expect that the combined EBITDA of gaming companies with exposure to Asia Pacific (APAC) will fall around 70 per cent in 2020 before gradually recovering in 2021,” vice president/senior credit officer Jacintha Poh said.

She said despite the bleak outlook, most rated companies have sufficient liquidity to meet their cash needs and debt payments over the next 12 months.

Poh said companies’ leverage would remain elevated in 2021 versus 2019 amid an increase in debt to boost liquidity.

She said since April, five companies have raised a total of around US$6.7 billion to boost their liquidity.

"Large expansionary capital spending will also constrain the pace of leverage recovery, as most companies will likely continue their significant expansionary projects on the expectation of an eventual sector recovery,” she said.

She said some companies are expected to draw down project financing loans to complete ongoing developments, keeping debt levels elevated.

Meanwhile, she said operators in Malaysia (A3 stable) and Australia (Aaa stable) could recover sooner because of their significant domestic customer base, whereas recovery in Singapore (Aaa stable) and Cambodia (B2 stable), which are more reliant on tourism, would be slower.

She added that Macao’s (Aa3 stable) recovery would rest on China's (A1 stable) resumption of the individual visa scheme for Chinese citizens visiting the city. - Bernama