[ET Net News Agency, 12 April 2018] S&P Global Ratings revised its rating outlook on
China-based property developer Sunac China Holdings Ltd. (01918) to stable from negative.
The credit rating agency also affirmed its 'B+' long-term issuer credit rating on Sunac
and the 'B' long-term issue rating on the company's outstanding senior unsecured notes.
It revised the outlook because the agency expects Sunac's leverage to improve in 2018 on
the back of strong contracted sales, stable margins, and a reduced appetite for
debt-funded acquisitions.
S&P estimated that Sunac's see-through debt-to-EBITDA ratio, including the attributable
non-consolidated financials of joint ventures (JVs) and associates, improved to 15x in
2017, from about 19x in 2016.
It anticipates that the ratio will improve further to about 10x in 2018 based on S&P's
expectation of strong earnings growth and more controlled expansion. However, the
company's still-high leverage and uncertainty over its acquisitions continue to constrain
the rating.
The agency believes that Sunac's land acquisition spending will stabilize at about
RMB100 billion each year in 2018 and 2019, compared with RMB116.2 billion in 2017. The
company's land acquisitions fell to RMB7.9 billion in the first quarter of 2018, from a
pro rata amount of around RMB30 billion in the previous year.
This is possible because Sunac has large land reserves of 147 million square meters and
an additional 71 million square meters in urban redevelopment projects that the company
hasn't acquired the land use rights. S&P estimated this is sufficient to support sales
growth over the next five years. (KL)