March 11 (The following statement was released by the rating agency)
SINGAPORE, March 11 (Fitch) Fitch Ratings says Malaysia-based Genting Berhad's
(Genting) purchase of Boyd Gaming's 87-acre Echelon site at Las Vegas does not
have an immediate impact on its ratings. Genting's Long-Term Issuer Default
Rating is 'A-' with Stable Outlook.
The ratings have incorporated the possibility of global expansion via entry into
new gaming markets, which carries material project execution and funding risk.
However, the impact to the overall credit profile will only become apparent once
there is greater clarity regarding the scale and timing of the full project, as
well as the specific funding structure.
The proposed gaming facility, which will bring diversification to Genting and is
subject to regulatory approvals and could in Fitch's view open by 2016. Its
initial USD350m investment is small in relation to its scale (FY12 revenues
totalled MYR17.25bn, approximately USD5.57bn) and liquidity (cash of MYR21.2bn
or USD6.8bn). There is no clarity yet regarding the mode of funding this
project, i.e., how much debt will be raised to fund this project, and joint
venture partners, if any.
Genting has the financial wherewithal and expertise to undertake a project of
this scale and nature. The group operates Resorts World Casino New York City,
owns substantial land bank in downtown Miami and plans to develop an integrated
casino resort, if approved by the Florida legislature. The Las Vegas market,
while intensely competitive, is a destination for Asian premium and VIP players
and therefore provides marketing synergies with its existing operations in the
US as well as southeast Asia.
While Genting Bhd's and Genting Singapore Plc's (GENS, A-/Stable) recently
published FY12 results were marginally below Fitch's expectations, their
financial metrics remain appropriate for their rating level. Following sluggish
business volumes in the premium players segment at its Singapore integrated
casino resort, Resorts World Sentosa (RWS), during the first three quarters of
2012, business volumes improved in Q412 and occupancy rate at the RWS hotels was
high at 91%.
GENS incurred one-time SGD28.26m (approximately USD22.7m) pre-opening expenses
as part of the inauguration of its Marine Life Park (MLP). With the improvement
of the premium players' business volumes, hotel occupancy rates holding up and
completion of MLP, Fitch expects GENS's operating margins to improve in 2013.
Genting's rating also reflects its monopoly position in the Malaysian gaming
market, strong market position in the duopolistic Singapore gaming market, a
moderately diversified business profile through its power, plantation and oil
businesses and its net cash position.
Genting's FY12 results were boosted by a MYR1.89bn (approximately USD610m)
one-time gain from the sale of its Kuala Langat power plant to 1Malaysia
Development Berhad. If the impact of the one-time gains in FY11 and FY12 were
excluded, FY12 net income from continuing operations at MYR3.72bn was 24.2%
lower than the corresponding FY11 figure of MYR4.91bn. This was mainly due to
weaker performance of the premium segment in Genting's RWS, and its plantation
business on account of the lower crude palm oil prices in 2012. Other
contributing factors to Genting's 2012 performance were the write-off of MYR326m
assets and MYR397.4m impairment losses reported. The latter predominantly
consisted of MYR178.7m impairment loss on account of an investment made in an
associate, MYR102.2m write-down of certain UK casino licenses, and a MYR87.5m
impairment loss relating to Omni Center, Miami, Florida.