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Fitch affirms Lai Fung's ratings

Fitch Ratings affirmed Lai Fung Holdings Ltd. long-term foreign and local currency issuer default ratings at BB-, with a stable outlook.

The rating agency also affirmed the Hong Kong real estate developer's senior unsecured ratings and the rating on its US$350 million senior notes due 2023 at BB-, according to an Oct. 8 report.

The affirmation is supported by Lai Fung's stable financial profile, diversified rental income, recovered residential profitability, as well as by the company's Novotown real estate project in China, which is a long-term positive.

The agency, however, added that Lai Fung's ratings continue to be constrained by its small investment property EBITDA of roughly US$60 million and the large number of investment properties under development, spanning 3.3 million square feet of gross floor area.

Fitch expects the developer's investment property EBITDA interest cover to remain above 1.0x due to the stable demand for office buildings in tier 1 cities in China. The agency also expects the company's gross profit margin to remain at above 30% in the next two to three years, underpinned by low land cost.