Sun Hung Kai Properties outlook revised to stable by S&P

Investing.com -- S&P Global Ratings revised its outlook on Sun Hung Kai Properties (HKEX:0016) to stable from negative on Monday, while affirming its ’A+’ ratings.

The rating agency expects SHKP to continue using cash proceeds from property sales and rental income to reduce its adjusted debt. S&P estimates the company will decrease its debt by HK$4 billion to HK$5 billion annually from fiscal 2026 to fiscal 2028.

SHKP is projected to generate HK$30 billion-HK$33 billion in contracted sales annually during this period. In fiscal 2025, the company achieved HK$46 billion in sales, exceeding S&P’s forecast of HK$30 billion, primarily driven by successful launches of its Cullinan Sky and Sierra Sea projects in Hong Kong, which generated HK$19.7 billion in sales.

The property developer is expected to maintain stable rental income of approximately HK$20 billion per year during fiscals 2026-2028. In fiscal 2025, rental income remained broadly stable at HK$19.9 billion, compared with HK$20.4 billion in fiscal 2024.

S&P anticipates SHKP will remain disciplined in land acquisitions, spending about HK$5 billion annually during fiscals 2026-2028, representing 15%-17% of its annual contracted sales. This is lower than the company’s recent peak of about HK$14 billion in fiscal 2021.

The rating agency forecasts SHKP’s adjusted EBITDA margin will be about 36% to 40% in fiscals 2026-2028, down from 42% in fiscal 2025. The company’s debt to EBITDA ratio is expected to stabilize at 3.1x during fiscals 2026-2028, improved from 3.6x in fiscal 2024.

S&P may lower the rating if Hong Kong’s real estate sector worsens sharply or if SHKP’s debt-to-EBITDA ratio exceeds 3.5x on a sustained basis. Conversely, a rating upgrade could occur if the debt-to-EBITDA ratio remains below 2x and rental income continues to comprise the bulk of earnings and cash flow.

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