KUALA LUMPUR: Genting group, which houses listed firms such as Genting Bhd and Genting Malaysia Bhd, may recover to pre-Covid-19 levels only in 2023 instead of 2022 projected by S&P Global Ratings earlier.
This follows the emergence of Covid-19 Delta variant that has triggered lockdowns and heightened social restrictions in Southeast Asia.
S&P primary credit analyst Shawn Park said this could materially affect Genting group's leisure and hospitality operations in the region, especially in Malaysia, resulting in further delays in earnings recovery.
Besides Genting, S&P had on August 20 downgraded its long-term issuer ratings on Genting Malaysia to "BBB-" from "BBB", Resorts World Las Vegas LLC (RWLV) to "BB+" from "BBB-", and Genting New York LLC to "BB+" from "BBB-".
During a briefing today, Park said the rating agency now expected Genting's earnings before interest, taxes, depreciation and amortisation (Ebitda) to recover to pre-pandemic levels only in 2023 instead of next year.
"We expect a slower recovery in key credit metrics at Genting, stemming from weaker performance in Malaysia. The slower-than-anticipated recovery hinges on continued travel and social restrictions in Southeast Asia, mainly Malaysia, and as a result, Genting Malaysia's principal asset, Resorts World Genting (RWG), has been closed since May 2021.
"Given the ongoing uncertainties surrounding the delta variant and a slower-than-expected operational recovery in the region, we now expect Genting group companies' Ebitda to reach pre-pandemic levels only in 2023, from the previous 2022," he said.
Similarly, Park said the group's debt to Ebitda ratio would remain above three times until 2023, which was beyond the threshold of the previous "BBB" rating.
S&P has also lowered its issue rating on Genting Malaysia to"'BBB-" from "BBB'', senior unsecured rating on RWLV to "BB" from "BBB-", and senior unsecured rating on Genting New York to "BB+" from "BBB-".
At the same time, the agency affirmed its "BBB-" ratings on RWLV's senior secured revolving facility and term loans, and revised Genting Malaysia's stand-alone credit profile to "bb" from "bb+"
Park said the stable outlook on Genting group companies reflected S&P's expectation that its credit quality would stabilise, following the completion of a major investment cycle, while an operational recovery takes shape over the next two years as Covid-19 vaccination rates increased in its key markets.
S&P said the group's US assets had quickly recovered, with earnings from RWLV to meaningfully contribute from 2022.
However, the better-than-expected recovery of Genting New York and ramp up of RWLV were inadequate to mitigate the group's weakened Southeast Asian operations.
The firm said with the normalisation of operating hours effective April 5 this year, Genting New York's operating performance in the first half of 2021 would likely recover strongly to pre-pandemic levels.
Despite S&P's expectation of a strong recovery, the downward revision of the issuer credit rating of Genting New York reflects that on the Genting group.
Separately, following the opening of its integrated resort in June, RWLV's operations have been profitable with visitation numbers in Las Vegas sharply going up toward pre-pandemic levels.
As of June this year, visitations in Las Vegas jumped around 180 per cent year-on-year, reaching 82 per cent of pre-pandemic June 2019 levels.
Hotel occupancy rates improved to 75.9 per cent compared to June 2020's 41 per cent and a pre-pandemic 91.7 per cent.
By 2022, S&P expects RWLV to contribute 18 per cent or US$180 million in Ebitda to the Genting group.