S&P Global Ratings revised Fosun International Ltd.'s outlook to positive from stable while affirming the BB long-term issuer credit rating, citing its expectations for an improvement in the company's portfolio liquidity and diversity.
"Such improvement is likely to be the result of an appreciation in the value of Fosun's existing listed assets or IPOs of unlisted investee companies," the rating agency said.
Ratings said the Shanghai-headquartered conglomerate's focus on driving synergies across a range of investment companies will help create value. This is expected to improve its ratio of listed assets to total assets to approximately 50% over the next 12 to 18 months, compared with 46% at the end of 2018.
Cash flow adequacy is expected to remain weak at 0.6x in the next 12 to 18 months, but Ratings expects the company to ease the risk with cash on hand of 22 billion Chinese yuan.
The rating agency anticipates an approximately 15% growth in Fosun's dividend income, supported by an improvement in portfolio companies' operations and an investment portfolio expansion. As the company's interest-bearing debt rose 16.5% year over year at the end of 2018, Ratings expects interest expense to climb accordingly.
Ratings said it could revise the outlook down to stable if the company fails to improve its asset liquidity over the next 12 to 18 months.
As of May 28, US$1 was equivalent to 6.91 Chinese yuan.