[ET Net News Agency, 23 April 2018] Moody's Investors Service said that Moody's-rated
Hong Kong property companies will show steady earnings growth over the next 12-18 months,
and that the stable outlook of most companies is supported by their solid business
profiles.
"Improving retail and stable office rents and higher residential development income will
support a 5%-10% increase in weighted-average EBITDA for our ten rated Hong Kong property
companies over the next 12-18 months, while primary residential presales growth may slow
amid increasing capital and stock market uncertainty," said Stephanie Lau, a Moody's Vice
President and Senior Analyst.
"Overall, the outlook for our rated Hong Kong property companies is stable, supported by
their strong business profiles, diversified operations and sufficient liquidity," added
Lau.
Moody's conclusions are included in its just-released report "Property -- Hong Kong:
Improving retail and stable office rents will support rated companies' credit quality".
Of the ten property developers that Moody's rates, Moody's said that two - Sun Hung Kai
Properties Limited (00016)(Sun Hung Kai Properties (Capital Market) Ltd. A1 stable), and
CK Asset Holdings Limited (A2 stable)(01113) -- will outperform their peers in terms of
adjusted EBITDA growth.
With the office segment, Moody's expects that office rental rates will grow by 0%-5%.
Rents in Hong Kong's central business district -- where most of Moody's rated companies
have a material presence -- will continue to grow, but moderate from a high base as
multinational corporation tenants become increasingly cost-conscious.
On the retail market, Moody's says that retail rental rates will grow by 5%-10% over the
next 12-18 months, propelled by a recovery in retail sales, tourist arrivals and stable
local employment trends.
As for the residential market, Moody's expects strong property presales since 2016
should lead to similarly strong sales recognition over the next 12-18 months, further
supporting the property companies' development income.
However, residential presales will likely moderate or decline over the next 12-18 months
from the high levels recorded in 2017. While residential property prices will continue to
grow, supported by a stable economy and moderate housing supply, Moody's expects that
various developments -- such as stock market volatility, the US-China trade dispute and
the potential for rising interest rates -- will leave buyers cautious.
Key downside risks include macroeconomic shocks, such as a sharper-than-expected
correction in the economic growth of Hong Kong or Greater China, a sharp tightening of
monetary conditions, or a collapse in global financial markets that could dampen
residential sales and commercial leasing demand.
The ten property developers that Moody's rates are: Sun Hung Kai Properties Limited, CK
Asset Holdings Limited, Link Real Estate Investment Trust (A2 stable)(00823), Swire
Properties Limited (A2 stable)(01972), Wharf Real Estate Investment Company limited (A2
stable)(01997), IFC Development Limited (A2 Stable), Hongkong Land Holdings Limited (A3
stable), Hysan Development Co., Ltd. (A3 stable)(00014), Champion Real Estate Investment
Trust (Baa1 stable)(02778) and Nan Fung International Holdings Limited (Baa3 stable). (KL)