Moody’s predicts deteriorating earnings for Melco Resorts and Genting Bhd


Moody’s predicts deteriorating earnings for Melco Resorts and Genting Bhd

Moody’s Investors Service Inc. predicts Asian operator Melco Resorts & Entertainment will see its consolidated debt grow from $6.1bn to $7bn over the next 12 to 18 months.

Inside Asian Gaming reported that, after the company’s announcement for senior notes worth $250m due 2029, Moody’s has given it a Ba2 rating.

The rating reflects the high quality of Melco’s Macau assets but warned the company’s debt will grow over the year.

The possibility of negative cash flow in 2021 could be attributed to “the company’s sluggish cash flow and planned capital spending, including the phase two construction of the Studio City property and the development of its Cyprus integrated resort.”

Moody’s report projected “Melco’s adjusted debt/EBITDA will be elevated at around 10x or higher in 2021 before improving to around 5x to 6x in 2022 and around 4x in 2023.”

Melco is not the only company that Moody’s took a closer look at. Genting Bhd is predicted to be “credit negative” as the situation in Malaysia “could derail earnings recovery.»

Due to its weak credit metrics, Genting Bhd has a rating of Baa2 negative.

Resorts World Genting is the only casino resort in Malaysia and is one of the bigger properties in the Genting Group. Malaysian hospitality segment experiences slow recovery and since it contributes around 34% of Genting Bhd’s consolidated EBITDA, it could “lead to leverage increasing to around 7.3 times in 2021.”

GGRAsia reported Genting should be able to weather the predicted lower earnings.

According to analysts, “Genting Bhd’s operating cash flow of around MYR4.5 billion ($1bn) over the next 15 months will be sufficient to cover an estimated capital spending and investment of around MYR13 billion and an estimated dividend payout of around MYR2.6 billion.”


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