TEXT-S&P summary: Genting Bhd.
Dec 11 -
===============================================================================
Summary analysis -- Genting Bhd. ---------------------------------- 11-Dec-2012
===============================================================================
CREDIT RATING: BBB+/Stable/-- Country: Malaysia
Primary SIC: Hotels and motels
Mult. CUSIP6: 372452
===============================================================================
Credit Rating History:
Local currency Foreign currency
16-May-2011 BBB+/-- BBB+/--
19-Dec-2007 BBB/-- BBB/--
===============================================================================
Rationale
The rating on Genting Bhd., a Malaysia-based gaming and leisure group,
reflects the group's solid market position, strong cash flows, and "modest"
financial risk profile. The risks arising from overseas expansion, earnings
concentration in the gaming business, and exposure to evolving regulations
partly offsets these strengths.
We view Genting's business risk profile as "satisfactory." The group has a
solid market position in gaming and has improved its geographic diversity over
the past few years. These factors have strengthened Genting's brand awareness,
and boosted other established brands such as "Resorts World," "Maxims,"
"Crockfords," and "Awana." The Genting group is the second largest gaming
company in the world, after Las Vegas Sands Corp. (BB+/Positive/--).
In our view, strong cash flow generation from Genting's gaming business
supports the rating, despite the group's earnings concentration in this
segment. Genting's gross margin remains the highest among its peers, at more
than 45% over the past two years, thanks to the favorable gaming tax regime in
Singapore. Resorts World Sentosa (RWS) in Singapore, which currently
contributes more than 45% of Genting's group EBITDA, is one of the largest
gaming properties in the world in terms of EBITDA generation, even though
growth in Singapore's gaming market has slowed materially since two integrated
resorts (Marina Bay Sands and RWS itself) opened in early 2010. The group's
Malaysian gaming operation, Resorts World Genting, recorded higher revenue
year-on-year for the first nine months of 2012 mainly due to an overall
increase in volume of business.
The Genting group's financial performance in the first nine months of 2012 was
below our expectations. Revenue declined (on a year-on-year basis) in most
business segments, particularly the Singapore gaming operations, which were
exposed to economic volatility and competitive pressures in the region, given
their reliance on international customers. We believe uncertain regulatory
policies could constrain gaming market growth in Singapore, and anticipate
that net gaming revenue in full-year 2012 will decline by about 5%. Our
preliminary expectation for 2013 is that net gaming revenue will grow by
0%-5%.
Our assessment of Genting's financial risk profile reflects our view of the
group's conservative financial management and record of controlling leverage
while expanding capacity. The group has solid financial strength, due to its
strong liquidity and profitability at its leisure and gaming operations. In
our base case, we expect Genting's financial performance to remain
satisfactory in 2013 supported by more stable gaming industry conditions in
the region despite uncertainties in the global economy. We expect revenue to
grow by 3%-5% a year in 2013-2015. We anticipate that the group's ratio of
gross debt to EBITDA will stay at or below 3.0x in the same period (the ratio
was 2.9x on a rolling 12-month basis in the third quarter of 2012, including
perpetual securities as debt) and be significantly stronger after netting off
surplus cash over the next two years. However, the ratio could deteriorate
depending on the group's appetite for growth in the gaming sector.
The rating incorporates our view that Genting could make large-scale
investments, through Genting Singapore PLC (GENS; not rated). GENS raised
Singapore dollar (S$) 2.3 billion via perpetual subordinated capital
securities (PerpS) in March and April 2012. PerpS are subordinated, deferrable
securities with no fixed maturity date. In accordance with our criteria on
hybrids, we assign minimal equity credit to PerpS, treating them entirely as
debt when calculating credit ratios. However, we acknowledge that PerpS have
certain equity-like characteristics when interpreting the company's metrics
and assessing its financial risk profile.
Liquidity
We assess Genting's liquidity as "strong," as defined in our criteria. We
expect the company's sources of liquidity to exceed its uses by at least 1.5x
over the next 12 months, and by more than 1.0x over the next 24 months. Our
liquidity assessment incorporates the following expectations and assumptions:
-- The group's sources of liquidity include unrestricted cash balances of
about Malaysian ringgit (MYR) 18.34 billion and available-for-sale financial
assets of about MYR3.06 billion as of Sept. 30, 2012, and funds from
operations of more than MYR6.0 billion.
-- Uses of liquidity include capital expenditure, working-capital
requirements, debt repayments, and dividend payouts. As of Sept. 30, 2012, the
group has MYR2.10 billion in short-term borrowings.
-- Net sources will remain positive and the group will remain in
compliance with its financial covenants even if EBITDA declines by 30%.
-- Genting has established and supportive banking relationships.
Refinancing risk is manageable, with debt maturities fairly well spread.
GENS' receivables are stabilizing. In our opinion, any significant increase in
GENS' receivables adds to the group's credit risk. Receivables increased in
2011 mainly due to credit provided to direct high-rollers to RWS. Such risk
could heighten if advances to direct players increase to secure a bigger share
of the "VIP" business.
Outlook
The stable outlook reflects our expectation that Genting will continue to
generate strong operating cash flows, and that its free operating cash flows
will remain positive. The outlook also incorporates our expectation that
Genting will take a prudent approach to further expansion while maintaining
strong liquidity.
Execution risk, particularly risk associated with gaming expansion, will limit
rating upside for the next few years. Beyond that, we could raise the rating
if Genting materially improves its financial performance such that its ratio
of total debt to EBITDA is at or lower than 1.5x on a sustained basis. We
could also raise the rating if the group further diversifies its revenue
sources.
We could lower the rating if Genting's cash flows materially weaken, or the
company engages in aggressive debt-funded acquisitions or expansion projects
such that its ratio of total debt to EBITDA stays above 2.5x (after
considering surplus cash) on a lasting basis, and its strong liquidity
position materially diminishes.
Source: http://news.yahoo.com/text-p-summary-genting-bhd-111644448--sector.html
Levis Fireman Ed Allegiant Air Melissa Rycroft mega millions Cyber Monday Deals 2012 Colin Kaepernick