KUALA LUMPUR: The Covid-19 pandemic has severely hit the earnings of gaming companies in Asia Pacific (Apac), keeping their leverage elevated, Moody's Investors Service said.
The rating agency, however, said most had sufficient liquidity to weather the storm.
Falling international travel, property closures and the ongoing social distancing measures would keep the gaming sectors' prospects weak until at least 2021, Jacintha Poh, a Moody's vice president and senior credit officer, said in a report today.
"We expect that the combined EBITDA (earnings before interest, taxation, depreciation and amortisation) of gaming companies with exposure to Apac will fall around 70 per cent in 2020 before gradually recovering in 2021," Poh added.
All nine gaming companies with operations in Asia Pacific had negative outlooks, Moody's said.
The negative outlooks reflect uncertainties around the reopening of casinos and the pace at which operating performance will recover.
The firm said most rated gaming companies had sufficient liquidity to meet basic cash needs over the next 12 months.
The companies have sufficient cash equivalents and committed facilities to withstand temporary cash burn, which includes operating expenses, interest payments and maintenance capital spending, as well as meet their debt repayments this year.
"Based on the latest data on cash equivalents and committed facilities, we expect Genting Singapore Ltd (A3 negative) to have the largest liquidity buffer, likely sufficient for more than three years, assuming zero revenue, no dividend payment and no expansionary spending.
"Studio City Finance Ltd's (B1 negative) liquidity may run out in less than a year."
Moody's said leverage would remain elevated amid increase in debt to boost liquidity, and slow earnings recovery.
Rated gaming companies' leverage will improve in 2021 from a low base in 2020, but remain elevated versus 2019.
"We expect the pace of recovery for companies operating in gaming markets that are more reliant on tourism, such as Cambodia (B2 stable) and Singapore (Aaa stable), to be slower.
"Operators in Malaysia (A3 stable) and Australia (Aaa stable) could recover sooner because of their significant domestic-customer base."
For Macao (Aa3 stable), recovery will rest mostly on the easing of quarantine requirements between China (A1 stable) and Macao as well as China's resumption of the individual visa scheme for Chinese citizens visiting the city.
Moody's said before the virus outbreak, most rated gaming companies had either started or committed to significant expansionary projects amounting to a total of around US$20 billion over five years.
Despite current disruptions, most companies will likely continue pursuing these projects once operations normalise, because of their expectation for an eventual sector recovery,
or commitment made with regulators, or both.
"We expect an increase in capital spending to lead to debt levels staying elevated because some companies will draw down on project financing loans to complete ongoing developments.
Others could deploy the additional liquidity raised for expansion," it added.