S&P lowers Yuexiu Property

Standard & Poor’s said it revised the outlook on Yuexiu Property Co. Ltd. to negative from stable.

The agency also said it affirmed the company’s BBB- long-term corporate credit rating.

In line with the outlook revision, S&P also said it lowered the long-term Greater China regional scale rating on the company to cnBBB+ from cnA-.

The outlook revision reflects the deterioration in Yuexiu Property’s financial leverage and a corresponding weakening of the credit profile of its parent, Guangzhou Yuexiu Holdings, S&P said.

Yuexiu Property’s contribution to the parent company’s revenue is significant at more than 60% and the agency said it considers it as a core subsidiary of Guangzhou Yuexiu Holdings, the agency said.

S&P also said it believes Yuexiu Property’s EBITDA margin is unlikely to improve in the next few years because its low-margin projects account for 50% of total sales.

Revenue growth likely will be muted because of the single-digit growth in contract sales, the agency said, and the company will not be able to compensate for the lack of margin improvement.

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