RWS’ RM13.7b redevelopment plan to have modest impact on Genting


GENTING Singapore Ltd’s S$4.5 billion (RM13.65 billion) five-year redevelopment plan at Resorts World Sentosa (RWS) will have a modest impact on leverage and earnings of the company.

A research note by Fitch Ratings Inc stated that the ratings of the parent company, Genting Bhd, are also not affected by the redevelopment of the integrated resort as the impact on its credit metrics is manageable within its current creditworthiness.

The rating agency added that the development is also neutral to Genting’s credit profile.

“Genting’s leverage will be higher than our previous expectations and the gaming tax in Singapore will increase in 2022 by about 3%,” the research note read, adding that Genting has the liquidity, leverage and free cashflow capacity to fund the development within its current rating.

Fitch said the company has the deleveraging capacity once Resorts World Las Vegas opens by end-2020.

That would also return its leverage to around one time, which is commensurate with its ‘A-’ Issuer Default Rating.

Fitch stated that Genting Singapore is also expected to maintain a stable dividend payout of around S$3.5 cent per share during the period of high capital expenditure (capex) such that cashflows at Genting Overseas Holdings Ltd will not be impaired.

The agency added that once the casino tax and casino entry levy are in effect, Genting Singapore’s earnings before interest, taxes, depreciation and amortisation is estimated to be reduced by 5% as foreigners comprise a larger share of the company’s gaming revenue.

However, the rating agency has projected that the incremental revenue from the Singapore development would roughly offset the higher tax structure and higher entrance fees planned for Singaporeans and permanent residents.

Fitch had also factored in S$800 million of discretionary capex per year from 2021- 2022 when it affirmed Genting’s ratings in November 2018 to account for potential new investments due to the capital-intensive nature of the business.

“After adjusting our forecasts following the redevelopment announcement, we expect Genting’s leverage to increase by around 0.5 time, and to peak in 2020 at around two times from our previous forecast of 1.6 times,” it stated.

However, Fitch has not factored in any additional investment with respect to Genting Singapore’s intent to bid for the integrated-resort project in Japan in the forecast amid the uncertainty over whether the project will go ahead.

The rating agency said any additional multibillion-dollar investments will likely delay Genting’s deleveraging trajectory, and may constrain its ability to deleverage to below one time, the level at which Fitch would consider a negative rating action.