Moody’s Investors Service says that the weighted average annual EBITDA growth for the nine property companies that Moody’s rates in Hong Kong (Aa1 negative) will register 2%-4% in their respective 2016-2017 fiscal years.
“The companies show good asset quality, well-staggered lease expiries and proactive lease management,” says Stephanie Lau, a Moody’s Assistant Vice President and Analyst. “We expect that most of the companies’ ratings will carry stable outlooks over the next 12-18 months, because of their sufficient ratings headroom.”
“Our EBITDA growth projection of 2%-4% for Moody’s-rated Hong Kong property companies for their respective 2016-2017 fiscal years is based on our expectation of continued high retail occupancy rates, flat to modest growth in office rentals, and largely stable primary residential sales,” adds Lau.
Moody’s analysis is contained in report titled “Property — Hong Kong: Rated Property Companies’ Earnings to Rise Modestly in 2016-17,” and is authored by Lau.
Moody’s report says that three companies will likely record higher EBITDA growth of around 5%-7% in fiscal 2017. Moody’s names Sun Hung Kai Properties Limited (unrated) and Cheung Kong Property Holdings Limited (A2 stable) as two of the three, owing to their strong residential presales in the last 12-18 months, and strong recurring office and retail income.
Moody’s also says that primary residential prices and volumes will stay strong through 2017, because of abundant liquidity, well-balanced supply and demand fundamentals, and low mortgage rates.
As for office rentals, Moody’s says demand growth for Grade A office space should slow, as indicated by a marginal increase in vacancy rates to 4.2% as of 30 September 2016 from 3.3% as of 31 March 2016.