Genting group faces ‘fallen angel’ risk, ‘no more buffer’ for earnings downside: S&P

S&P Global Ratings says Malaysian gaming and plantations conglomerate Genting Bhd has “no more buffer” for further earnings disappointment, with elevated spending and weak operating results keeping the group at risk of losing its investment-grade rating. The ratings agency said in a Tuesday report that Genting’s ratio of funds from operations (FFO) to debt was likely to remain at about 15 percent to 17 percent through 2028, below the institution’s 20-percent downside trigger. Genting and several of its subsidiaries are rated by S&P at “BBB-” – the lowest investment-grade level – with a “negative” outlook. “The combination of earnings underperformance and high spending could keep the group’s leverage ratio of FFO to debt about 15 percent to 17 percent through 2028,” wrote analysts Isabel Goh, Shawn Park, and Fiona Chen. They added: “The group has no more buffer for a further downward surprise to operational earnings. Its credit metrics are diverging further from [the] downside trigger, and as such, making near-term recovery seem increasingly unlikely.” S&P lowered its earnings before interest, taxation, depreciation, and amortisation (EBITDA) projections for Genting by approximately 3 percent after the group’s first-half 2026 results “fell short” by about 5 percent of the ratings agency’s expectations. The shortfall was primarily linked to underperformance at Genting Singapore Ltd, operator of the Resorts World Sentosa casino-resort in the city-state; Genting New York LLC, which runs Resorts World New York City (RWNYC); and Resorts World Las Vegas LLC, operator of the Resorts World Las Vegas property in Nevada, the United States. S&P expects the Genting group’s annual capital expenditure to reach nearly MYR11 billion (US$2.70 billion) in 2026 and exceed MYR9 billion in 2027, before falling below MYR9 billion in 2028. That compares with MYR5.3 billion in 2025. The spending includes the Resorts World Sentosa expansion, construction work at RWNYC and a floating liquefied natural gas project scheduled to be completed in the second half of 2027, according to the report. The Genting group’s commitments with the New York authorities entail a US$5.5-billion expansion of the existing RWNYC venue through to 2030. Given the scale of those investments, S&P expects Genting to generate negative discretionary cash flow and its adjusted debt to increase through 2028. Debt pressure, Singapore woes The ratings agency forecasts Genting’s revenue to expand by between 10 percent and 15 percent in each of 2026 and 2027, before growth slows to below 5 percent in 2028. The increase should be primarily driven by the new commercial casino operations in New York, launched on April 28. Annual group EBITDA is forecast at between MYR8 billion and MYR9 billion in 2026, rising to MYR9.5 billion to MYR10 billion in 2027, and surpassing MYR10 billion in 2028. S&P said it could downgrade Genting if earnings weakness persisted and the group lacked sufficient measures to prevent further deterioration in its credit profile. Any unexpected debt-funded acquisitions could also trigger a downgrade, it added. The institution said a potential debt-funded privatisation of Genting Malaysia Bhd – operator of the Resorts World Genting casino resort in Malaysia – would place further pressure on the parent’s rating. Such a transaction could be ratings-neutral if funded using new proceeds from asset disposals, it noted. The ratings agency also said Genting had several potential deleveraging options, including selling four parcels of non-core land in Miami, in the United States. Genting had sought to sell the land for US$1.23 billion in cash in 2023, but the transaction did not proceed. A sale at a similar valuation could improve the group’s FFO-to-debt ratio by between 3 and 4 percentage points, according to S&P. S&P also described the weakness at Genting Singapore as “structural” and unlikely to be reversed quickly. Resorts World Sentosa faces competitive challenges relative to rival Marina Bay Sands, run by a unit of Las Vegas Sands Corp, which has a more central location and is close to international hotels, stated the ratings agency. Ongoing construction affecting Resorts World Sentosa’s hotels, casino floor, waterfront complex, restaurants and retail areas could also be reducing the resort’s appeal and visitor traffic. Higher technology, staffing and marketing costs linked to the expanded resort and its non-gaming attractions were likely to weigh on margins until revenue increased considerably, S&P suggested. The institution expects Genting Singapore’s earnings to remain soft for several quarters, albeit with a gradual improvement as Resorts World Sentosa’s facilities are renovated in phases. Genting Singapore accounts for approximately 20 percent to 30 percent of group EBITDA. S&P said persistent underperformance at the subsidiary could eventually lead to a downgrade of the parent if it were not offset by stronger results elsewhere or concrete deleveraging measures. According to the rating agency, the ramp-up of RWNYC’s full casino operations has also been “below” its expectations. The property generated nearly US$530 million in gross gaming revenue during the first four months following its commercial casino launch, slightly below S&P’s forecast. The agency cut its 2026 gross gaming revenue projection for RWNYC to between US$1.4 billion and US$1.5 billion. It also reduced its 2026 EBITDA forecast for the property to nearly US$150 million, from US$200 million. S&P expects RWNYC’s annual EBITDA to rise to between US$200 million and US$400 million in 2027 and 2028. The S&P report comes shortly after Fitch Ratings downgraded Genting’s long-term issuer default rating to “BBB-”, from “BBB”, while assigning it a “stable” outlook.