[ET Net News Agency, 18 May 2018] S&P Global Ratings revised its outlook on China-based
property developer Hopson Development Holdings Ltd. (00754) to positive from stable.
At the same time, the credit rating agency affirmed its 'B-' long-term issuer credit
rating on the company. It revised the outlook on Hopson to positive because S&P expects
the company will continue to ramp up its investment property portfolio and rental income,
thus enhancing its profitability and income stability for debt servicing.
The agency believes the company has made significant strides in building up its property
investment portfolio over the past few years, and the assets are starting to make material
contributions to its earnings and cash flow.
S&P believes the company has a reasonable chance of improving its liquidity and managing
its leverage at a stable level. Nevertheless, Hopson's liquidity is less than adequate
with a large short-term debt, while its leverage, at around 12x debt to EBITDA, is still
high.
The agency expects Hopson to increase its rental income by over 50% in 2018 to reach
HK$2 billion, increasing from the over 30% growth it recorded in 2017. The growth is
reasonably visible given that it is mainly attributable to new rental income from Beijing
Hopson One opened at the end of 2017.
In addition, strong positive rental reversion at Shanghai Hopson International will be
realized in 2018 with the majority of tenants' contracts coming up for renewal. Therefore,
S&P expects rental income to be sufficient to cover 55%-60% of the company's gross
interest expense in 2018, enhancing its ability to service debt. In addition, natural
rental appreciation across existing projects that are generally well located will boost
its income. (KL)