Slower earnings recovery, heavy capex weigh on Asian gaming-operator credit outlook: Fitch

Slower-than-expected earnings growth and substantial capital spending (capex) are keeping leverage elevated among several gaming operators in the Asia-Pacific (APAC) region, with company-specific pressures driving a series of credit rating downgrades, says Fitch Ratings. In recent commentary accompanying its “APAC Gaming – Peer Credit Analysis” report, the institution said most operators covered by its review had been downgraded in recent months. It attributed those actions to individual companies’ leverage and operating challenges, rather than broad deterioration across the sector. The peer review covers Malaysian conglomerate Genting Bhd and its unit Genting Malaysia Bhd; Macau casino operator SJM Holdings Ltd; Japan’s Universal Entertainment Corp; and Australian wagering firm Tabcorp Holdings Ltd. Fitch said earnings before interest, taxation, depreciation and amortisation (EBITDA) had grown more slowly than expected relative to operators’ “substantial capital expenditure commitments,” prolonging the period of elevated leverage. For Genting Bhd and Genting Malaysia, both rated ‘BBB-’ with ‘stable’ outlooks, reducing leverage depends largely on the earnings ramp-up at the group’s casino business in New York in the United States. Fitch downgraded both companies from ‘BBB’ in September. Its action on Genting Bhd reflected expectations that proportionately consolidated EBITDA net leverage would remain above 4.0 times for the next three years, amid expansion spending in Singapore – where its unit Genting Singapore Ltd runs the Resorts World Sentosa casino complex – and New York, higher start-up costs in New York and a gradual recovery in other markets. The latest peer report identifies Genting New York LLC’s full-scale casino development as the principal EBITDA growth driver for the Malaysian group. But the subsidiary’s capital expenditure is expected to average about US$800 million annually over the medium term, putting pressure on credit metrics during the construction phase, noted the ratings agency. Fitch also said recently that it expects Genting New York’s EBITDA to reach about US$450 million in 2028, compared with a forecast US$208 million this year. For SJM Holdings, rated ‘B+’ with a ‘stable’ outlook, Fitch expects EBITDA leverage to decline from around 9.0 times in the first half of 2026 to around 6.0 times in 2028. That improvement should be supported by the gradual realisation of cost savings following the restructuring of its satellite casino operations in the second half of 2025, and lower capital expenditure after 2026. Fitch downgraded SJM Holdings from ‘BB-’ in May, citing slower-than-expected deleveraging and earnings recovery, including lacklustre performance at its Cotai casino resort, Grand Lisboa Palace. Universal Entertainment, the parent of Philippine casino resort Okada Manila, faces more pronounced operating pressures. Fitch’s July downgrade to ‘CCC+’ from ‘B-’ reflected deteriorating performance and structural challenges. The institution said weaker gaming demand, competition, higher promotional spending and migration to online gaming were constraining recovery at Okada Manila. VIP table games accounted for 20 percent of the resort’s gross gaming revenue in 2025, down from 35 percent in 2023, Fitch noted. The structural decline in VIP gaming may not be fully offset by growth in the lower-spending mass segment, limiting the Philippine gaming sector,” the ratings agency added. Fitch forecasts Universal Entertainment’s annual EBITDA at about JPY19 billion (US$120.4 million) through 2028, below the approximately JPY20 billion needed to cover cash interest and capital expenditure. Despite the individual pressures, Fitch said “regulatory protection remains the region’s core credit strength across the peer group”. “High barriers to entry, underpinned by exclusive or monopoly licensing structures across multiple jurisdictions, continue to support strong sector characteristics assessments for most rated issuers and distinguish the region’s competitive dynamics from those of more fragmented gaming markets elsewhere,” it added.