Genting Singapore Credit Rating Supported by RWS, Says Moody’s

Momentum at Resorts World Sentosa (RWS) is supportive of Genting Singapore’s solid credit rating, according to Moody’s Investors Service.

In a new report, the ratings agency affirmed its “A3” grade and “stable” outlook on the gaming company, noting the duopoly status Genting has in Singapore is a driver of earnings growth and free cash flow. Resorts World Sentosa and Las Vegas Sands’ (NYSE: LVS) Marina Bay Sands are the two casino hotels in the city-state. Both operators are spending in significant fashion to enhance those properties.

GENS is expanding and refreshing its offerings at RWS in phases for a total cost of SGD6.8 billion, which includes the amount already spent,” observed Moody’s. “Although the amount is significant, the capital expenditure will be spread across multiple years, peaking at an estimated SGD1 billion per annum between 2027 and 2029.”

The research firm added Genting Singapore should post modest earnings growth this year even with the headwind of some of its RWS room supply being offline due to renovations.

Genting Singapore Balance Sheet Impressive

At a time when capital expenditures are necessary to bolster RWS amid increasing competition from the United Arab Emirates (UAE) and perhaps Thailand, Genting Singapore has a significant advantage in the form of its balance sheet.

“The company will likely fund its capital spending using internal cash sources. Consequently, GENS’ credit metrics and liquidity will remain strong because the company has minimal debt and sizable cash holdings of SGD3.7 billion as of June 2024,” added Moody’s.

Even if the gaming operator opted to head to capital markets to pay for some of its RWS-related spending, the cost of that financing would be low due to the company’s A3 credit rating, which is well into investment-grade territory. Genting Singapore sports a higher credit rating than its parent company Genting Bhd.

Genting Singapore Faces Minimal Downgrade Risk

At A3, there’s not much room for Genting Singapore to be upgraded as Moody’s has just three grades above that. That doesn’t imply the operator is at risk of a downgrade – a scenario that could easily be averted provided the company doesn’t rapidly take on significant debt.

“We could downgrade GENS’ rating if there is a prolonged weakness in its operating performance, such that its earnings and credit metrics deteriorate; the company fails to maintain its 100% ownership of RWS; it increases debt at Resorts World at Sentosa Pte. Ltd., resulting in structural subordination risk; or its adjusted net debt/earnings before interest, taxes, depreciation, and amortization (EBITDA) exceeds 1.0x,” concluded Moody’s.

An upgrade would be possible if Genting Singapore could maintain a debt/EBITDA ratio of below 3x and cash flow/net debt above 30%-35%.