As travel increases, Fitch raises its revenue prediction for GEN Malaysia

September 19, 2024 Malaysia Industry Updates

Fitch Ratings Inc. has raised its revenue forecast for Genting Malaysia Bhd for 2024 and 2025, projecting the casino operator to reach “up to 100 percent of the 2019 level,” which was the last trading year before the Covid-19 pandemic.

Fitch stated, “We expect higher revenue due to a rebound in domestic traffic and an increase in international tourists as regional travel continues to recover, aided by the completion of repairs to the access road to Genting Highlands in July 2024,” in a report published by GGRAsia.

Genting Malaysia operates Resorts World Genting in Genting Highlands, Malaysia’s only licensed casino. The company also manages casinos in the United States, the Bahamas, the United Kingdom, and Egypt.

On Wednesday, Fitch affirmed Genting Malaysia’s long-term issuer default rating at “BBB” with a “stable” outlook. The agency expects the casino firm to achieve a compound annual growth rate (CAGR) of 4 percent from 2024 to 2026 and maintain an average annual EBITDA margin of 27 percent over that period.

Genting Malaysia’s gaming and leisure business in Malaysia saw a 14 percent year-on-year increase in revenue during the first half of the year, driven by a recovery in travel demand. This segment accounted for over 60 percent of the group’s consolidated revenue in that period, according to Fitch.

“As a result, we have raised our revenue forecast for Genting Malaysia for 2024 and 2025 to up to 100 percent of the 2019 level. We expect higher revenue from a rebound in domestic traffic and an increase in international tourists as regional travel continues to recover,” said Fitch.

In full-year 2023, Genting Malaysia’s revenue rose by 18.4 percent year-on-year to MYR10.19 billion (around US$2.40 billion), with adjusted EBITDA increasing by 24.4 percent to MYR2.63 billion. In 2019, the company generated nearly MYR 10.41 billion in revenue and MYR 2.64 billion in adjusted EBITDA.

Fitch also expects Genting Malaysia’s annual capital expenditure to average around MYR950 million between 2024 and 2026, with an annual dividend outflow of MYR1 billion during that period.
“We anticipate Genting Malaysia’s EBITDA net leverage to decrease to around 3.0 times by 2026, down from 4.0 times in 2023 due to higher EBITDA growth,” Fitch said.

The agency noted that Genting Malaysia has “healthy liquidity,” with MYR5.4 billion in cash and equivalents as of June-end, against MYR2.1 billion in short-term borrowings. 2027 marks the due date for the group’s next major debt maturities, which add up to around MYR1.1 billion.

Fitch also affirmed the long-term issuer default rating of Genting New York LLC, a wholly-owned subsidiary of Genting Malaysia, at “BBB-,” along with its US$625 million senior unsecured notes due in 2029. Both remain on Fitch’s “rating watch negative” (RWN).

“The RWN will be resolved once it is confirmed whether Genting New York has secured a full-scale casino license in downstate New York or if it is no longer in contention,” Fitch said, noting that the bid process may take longer than six months to conclude.

If Genting New York wins one of the anticipated New York City casino licenses, the company plans to invest up to $5 billion, partially financed through new debt, without significantly impacting Genting Malaysia’s liquidity.