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00016 SHK PPT
RTNominal down75.450 -0.600 (-0.789%)
Research Report

29/11/2019 18:01

SHKP's (00016) record land tender consumes rating buffer

[ET Net News Agency, 29 November 2019] S&P Global Ratings said today that Sun Hung Kai
Properties Ltd.'s (SHKP)(00016) winning tender for the largest piece of commercial land
ever auctioned in Hong Kong will consume its ample financial buffer.
But the credit rating agency believes the tender's impact on the rating (A+/Stable/--)
will be limited, given SHKP's substantial war chest. The company achieved record-high
contracted sales of over HK$65 billion in the last fiscal year (ended June 2019), and it
has a strong recurring income of about HK$20 billion annually.
The company also plans to partner up with strategic investors, lightening the capital
intensity of developing this mega-size project in West Kowloon.
In an extreme scenario where SHKP would solely develop this commercial site, its
financial headroom would likely disappear and the company would be operating at the edge
of its rating buffer.
This is because of the record-high cash consideration of HK$42.23 billion, the large
development capex involved, and long project cycles for commercial properties. Under this
scenario, S&P estimated SHKP's pro-forma leverage could be slightly above a debt-to-EBITDA
ratio of 3x for the next one to two years, even though SHKP is likely to implement
deleveraging measures in such a situation. (KL)

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