S&P revises E-House view to negative

S&P said it revised the outlook on E-House (China) Enterprise Holdings Ltd. to negative from stable but affirmed the BB- ratings on the company and its debt.

“We revised the outlook to negative to reflect our view that E-house's continuous business investment needs in its real estate brokerage platform, Fangyou, and the company's consistently high cash balance to preserve its net debt position and other noncore spending may not allow it to improve its heightened leverage substantially in the next 12 months. The China-based primary real estate agency may also struggle again with a deficit in operating cash flow over the next six to 12 months,” S&P said in a press release.

The agency said it sees E-House's leverage, as measured by debt-to-EBITDA to rise to around 5.5x-6x by the end of 2020 from 3.4x in 2019. “The spike in 2020 leverage is also partially due to the suspension of its primary agency operations in the first quarter amid the Covid-19 pandemic,” S&P said.

S&P said it does believe E-House is ready to deal with the rising trend in online property sales. As announced in July, E-House and Alibaba Group Holding Ltd. will set up a joint venture to develop an online property sales platform, which will help the company to improve and broaden its market position. E-House will hold 15% of the RMB5 billion joint venture.

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