The Covid-19 pandemic has heavily hit Asia Pacific (Apac) gaming companies’ earnings, keeping their leverage high. However, the rating agency said most have enough liquidity to weather the storm.
Falling overseas tourism, property closures and continuing social distancing initiatives will hold the prospects of the gaming industries low until at least 2021, said today in a study Jacintha Poh, a Moody’s vice president and senior credit officer.
All nine gaming companies that have Asia Pacific operations had negative outlooks, Moody’s said. The negative outlook reflects uncertainties surrounding casino reopening and the pace at which operating performance is to recover.
The company said it had ample resources for the most valued gaming firms to satisfy essential cash needs over the next 12 months. The companies have enough cash equivalents and committed facilities to withstand temporary cash burn, which includes operating expenses, interest payments and maintenance capital expenditure, as well as meeting 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 enough for more than three years , assuming zero revenue, no dividend payment and no expansionary expenditure.
The (negative B1) liquidity of Studio City Finance Ltd could run out in less than one year. Moody’s said leverage will stay elevated to improve profitability and moderate sales recovery in the midst of debt rise.
The profitability of classified gaming firms will increase from a weak base in 2020 in 2021, but will stay elevated compared with 2019. For Macao (Aa3 stable), recovery should largely depend on easing quarantine conditions between China (A1 stable) and Macao, as well as restoring China’s person visa system to enter the city for Chinese residents.
Before the virus outbreak, Moody’s said that most of the rated gaming companies had either started or committed to significant expansionary projects amounting to around US$ 20 billion over five years. Despite current disruptions, most businesses will likely continue to pursue these projects once operations normalize due to their expectations of a possible sector recovery Or pursue to authorities, or both.