Sufficient liquidity buffers
GAMING operations in Asiapacific (APAC) markets are gradually reopening, but their earnings have been severely hit by the coronavirus pandemic.
However, Moody’s Investors Service believes most have sufficient liquidity to weather the storm.
In its latest report, Moody’s says falling international travel, property closures and the ongoing social distancing measures will keep the gaming sector’s prospects weak until at least 2021.
It expects the combined earnings before interest, taxes, depreciation and amortisation (Ebitda) of gaming companies with exposure to APAC to fall around 70% this year before gradually recovering in 2021.
Most of the rated companies have sufficient liquidity to meet their cash needs and debt payments over the next 12 months despite a gloomy outlook.
It says Genting Singapore Ltd has the largest liquidity buffer, likely sufficient for more than three years, but at the other end of the scale, the liquidity of Studio City Finance Ltd will run out in less than a year.
Moody’s says gaming companies’ leverage will remain elevated in 2021 versus 2019 amid an increase in debt to boost liquidity.
Since April, five companies have raised a total of Us$6.7bil amid slow earnings recovery.
It expects operators in Malaysia with an A3 stable rating and Australia (Aaa stable) to recover sooner because of their significant domestic customer base.
However, Macau’s (Aa3 stable) recovery will rest on China’s (A1 stable) resumption of the individual visa scheme for Chinese citizens visiting the city.
Before the virus outbreak, Moody’s says most rated gaming companies had either started or committed to significant expansionary projects amounting to a total of around Us$20bil over five years.
The rating agency says large expansionary capital spending will also constrain the pace of leverage recovery, as most companies will likely continue their significant expansionary projects on expectations of an eventual sector recovery.
Moody’s expects some companies to draw down project financing loans to complete ongoing developments, keeping debt levels elevated, the report states.