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S&P affirms Longfor Properties ratings, revises outlook to positive

S&P Global Ratings affirmed Longfor Properties Co. Ltd.'s BBB- long-term corporate credit rating and the BB+ issue rating on outstanding senior unsecured notes, revising the outlook to positive from stable.

The outlook revision reflects S&P's expectation that the Chinese real estate developer will continue to improve and maintain its debt leverage over the next two years, while its recurring rental income is set to be boosted by new mall openings and positive rental reversion. The developer's debt-to-EBITDA ratio is expected to improve to 3x in 2018 and remain under 3.5x for 2019.

Although Longfor is experiencing improvements in business diversity, its growth into the rental serviced apartments sector could increase execution risk, which could be mitigated by the company's asset-light model, low funding costs and first-mover advantages, according to the report.

S&P views the company's target of increasing rental income to 6 billion yuan by 2020 as achievable due to its new development pipeline and stable growth projection in 2018 and 2019.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.

As of March 30, US$1 was equivalent to 6.29 yuan.