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RTNominal down41.750 -0.300 (-0.713%)

16/03/2021 18:01

MTRC's credit buffer to reduce on protracted recovery

[ET Net News Agency, 16 March 2021] S&P Global Ratings said today that the credit
buffer of MTR Corp. Ltd. (00066) (MTRC; AA+/Stable/A-1+) is decreasing. The credit rating
agency attributed this to a likely protracted recovery path for the company's rail and
related operations for the majority of 2021.
That said, the agency also expects profits to increase from property development this
year, potentially alleviating leverage pressure.
S&P estimated MTRC's ratio of funds from operations (FFO) to debt ratio will hover at
4%-6% in 2021, before recovering to above 20% 2022 onwards. This is weaker than its
previous forecast of 13%-16% for 2021.
S&P would revise down MTRC's 'a' stand-alone credit profile if the ratio of FFO to debt
is below 13% on a sustained basis.
Passenger volume is unlikely to return to the 2019 level until 2022 or the first half of
2023, in our opinion. This is based on the current pace of COVID containment and possible
resurgences at a time when vaccinations are being gradually rolled out in Hong Kong. The
agency believes the weak patronage numbers will likely extend into the third quarter of
2021, which translates into an annual patronage rebound of 20%-25% from 2020, or 20%-25%
lower than 2019 levels.
In addition, changes in commuter habits and increased preference for work-from-home may
lead to a slower recovery in patronage. Total patronage across rail and bus passenger
services fell 31.5% year on year in 2020 due to the COVID-19 outbreak, closure of borders,
and tighter travel restrictions. (KL)

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