Earnings growth supported by rising tourist numbers, along with the completion of major capex projects, is expected to see Macau-based operators successfully deleverage over the next few years. However, the positive tourism affect will be less pronounced across Southeast Asia due to expansion plans and potential M&A, according to Moody’s Ratings.
In a note, Moody’s said it expects both Melco Resorts & Entertainment and SJM Resorts to prioritize debt reduction over the next 12 to 18 months with Melco’s gradual deleveraging to be supported by the completion of major projects, stronger earnings and sustained free cash flow.
SJM’s improvements could be tempered by the planned acquisition of two satellite casinos – Ponte 16 and L’Arc – with deleveraging dependent on earnings accretion generated from these assets, Moody’s analysts said.
“By 2026, we forecast adjusted debt/EBITDA to improve to 5.4x for Melco, 6.2x for Studio City and around 5.7x for SJM,” the ratings agency said. “SJM’s negative outlook reflects uncertainties around customer retention, satellite table reallocation and acquisition-related debt increments.”
Likewise, both Sands China on the completion of The Londoner renovations and Wynn Macau Ltd on improved performance and well placed to deleverage although Wynn is slated to spend US$750 million through end-2026 on a new events center and upgrades to existing facilities.
“We forecast leverage – as measured by adjusted debt/EBITDA – to improve to 3.2x to 3.5x for [Sands] in the next 12 to 18 months, from 3.7x in 2024,” Moody’s said. “The Macau operations for Wynn will improve and support its overall earnings, and we expect adjusted debt/EBITDA to register around 5.3x to 5.8x in the next 12 to 18 months.”
Conversely, Southeast Asian operators are poised for moderate earnings growth but ongoing expansion efforts are likely to weigh on free cash flow and delay deleveraging, Moody’s said.
Most notable is Genting Bhd’s proposed conditional voluntary takeover offer for Genting Malaysia, which the agency observed introduces additional uncertainty to Genting’s credit quality and financial profile.
Moody’s recently revealed that it was placing genting bhd on review for a ratings downgrade, adding, “In the event that the level of acceptance of this offer is substantially high, the potential impact on Genting Bhd’s leverage could be material.”
NagaCorp, operator of Cambodia’s NagaWorld, is likely to scale down its planned US$3.5 billion Phnom Penh expansion.
“While the investment amount is uncertain, we expect capex will still constrain free cash flow over the next two to three years,” Moody’s said. “As a result, NagaCorp’s leverage ratio will likely remain below 0.5x.”
The agency noted that NagaCorp’s Naga3 expansion – which was previously postponed until 2029 – may constrain free cash flow but its “low leverage and low-cost structure provide a financial buffer”.
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