[ET Net News Agency, 11 September 2018] S&P Global Ratings today said it had raised its
issuer credit rating and issue rating on Health and Happiness (H&H) International Holdings
Ltd. (01112) to 'BB+' from 'BB'. The outlook is stable.
At the same time, the credit rating agency had assigned its 'BB+' issue rating to the
company's proposed U.S. dollar-denominated senior unsecured notes.
The ratings upgrade reflects its view that H&H will increase its shares of its core
markets of infant milk formula (IMF) and vitamin, herbal, and mineral supplement (VHMS)
products.
At the same time, S&P expects the company's revenue and EBITDA to grow gradually, and it
should maintain its low debt leverage. The agency expects H&H's debt leverage to remain
below 2.5x over the next 12 months.
Since its acquisition of Australia-based Swisse Wellness Group Pty. Ltd. (Swisse) in
2015, H&H's debt leverage has gradually decreased through debt repayment and EBITDA
growth.
The company's debt-to-EBITDA ratio strengthened to 1.7x as of June 30, 2018, from 6.8x
at the end of 2015. Its annualized EBITDA interest coverage also improved to 6.0x as of 30
June 2018, from 4.7x in 2015.
S&P believes H&H will continue its good growth, fueled by rising health awareness and a
consumer desire for premium products in China. During 2011-2017, the baby food industry in
China experienced a 12.8% compound annual growth rate (CAGR) in retail sale value,
according to Euromonitor.
Similarly, VHMS products in China witnessed a 10.3% industry CAGR. Premium and super
premium IMF had expanded market share to 64.8% in June 2018 from 51.8% in 2016, according
to AC Nielson.
H&H's revenue grew 29% year on year in the first six months of 2018. This came after the
introduction of new IMF registration rules on 1 January 2018, which drove out the smaller
IMF manufacturers. (KL)