SHKP may get Moody's rating upgrade
Sun Hung Kai Properties (SHKP) is in line for a credit rating upgrade if the current pickup in the Hong Kong property market proves to be sustainable, Moody's Investors Service said in a report released yesterday.
'Moody's would expect to upgrade SHKP's rating to A1 from A2 within the next six to nine months if current trends lead to a sustainable recovery in the property market,' the ratings agency said. 'With 50 per cent of its cash flow originating from property development and 25 per cent from retail space leasing, [SHKP] is well positioned to benefit from such positive trends.'
The market welcomed the news, allowing SHKP's share price to edge 0.34 per cent higher to $73.50 on a day when the Hang Seng Index recorded its biggest loss since January 28. The stock had shed 6.08 per cent in the previous four sessions, however, as emerging investor concerns about high valuations were compounded by weak home sales over the weekend.
Moody's comments came after the ratings agency changed its outlook for the company's rating to positive from stable in December because of indications the local property market was bottoming out. The change also reflected the company's track record of achieving relatively steady cash flow from the sale of residential property developments and rental income.
SHKP's 'high-quality products and after-sales services have helped establish strong brand equity in the mass residential property market, strengthening its ability to achieve its sales targets during downturns and to charge greater premiums during any upturns,' Moody's said in the report.