S&P Global Ratings revised its outlook on Beijing Capital Group Co. Ltd. and its unit Beijing Capital Land Ltd. to stable from negative on improved deleveraging.
The rating agency affirmed its BBB- long-term corporate credit rating on the parent and its BB+ long-term corporate credit rating on the unit, as well as its BBB- ratings on Beijing Capital Group's outstanding guaranteed senior notes.
The outlook revision on both companies reflects S&P's expectations that Beijing Capital Group will remain committed to lowering its high financial leverage over the next two years.
The rating agency also attributed the revision to Beijing Capital Group's prudent financial policy. It expects the group to reduce its debt-funded expansion, increase the booking of higher-margin sales, dispose of its less-strategic assets, and therefore improve its debt leverage over time. This will be helped by recent central government policy that prioritizes state-owned enterprises' leverage reduction.
S&P expects Beijing Capital Group's financial risks to stabilize and improve, supported by a recovery in the profitability of Beijing Capital Land, which saw its gross margin recover to 31% in the first half of 2017, compared with just 9% a year ago.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.