Hutchison's 1H2014 growth support A3 ratings: Moody's

Continued gradual improvement in credit profile seen.

Moody's Investors Service says that Hutchison Whampoa Ltd's (HWL) results for 1H 2014 continue to support the company's A3 issuer and senior unsecured bond ratings.

According to a release from Moody's Investors Service, meanwhile, the ratings outlook is stable.

"For the first half of 2014, HWL reported growth in year over year revenue, EBITDA, and funds from operations of 3%, 4%, and 7%, respectively," said Joe Morrison, Moody's lead analyst for HWL.

"Strength in telecom and retail, which reported EBITDA growth of 16% and 9%, respectively, helped to offset weakness in the property sector, in which revenue was down 33% year over year largely due to lower development sales in China and deferrals of completion of development projects in China and Singapore."

Here's more from Moody's Investors Service:

Reported revenue and EBITDA referred to in this press release include the share of associates' and joint ventures' respective items but exclude property revaluation and profits on disposal of investment and others.

"The credit profile for the rolling twelve months ended 30 June 2014 was on par with the full year 2013 result.

Adjusted funds from operations (FFO) to net debt was about 21.0% and FFO to interest expense was about 4.9x. Adjusted net debt to capital improved to about 37.4% from 39.9% at year end."

"Given our expectation that any acquisitions will be undertaken within the framework of being accretive to earnings and cash flow, we expect continued gradual improvement in the company's credit profile.

Telecom and retail should continue to perform well, while higher contracted sales of residential units and asset sales in the property segment in the second half will offset the weakness exhibited in the first half," added Morrison.

HWL's A3 rating continues to be supported by its strong business position, diversified operations, and excellent liquidity position. Cash and equivalents (excluding equity holdings) of HKD110.0 billion at 30 June 2014 remained sufficient to fully cover the company's scheduled debt maturities through 2016.

HWL's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's: (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside HWL's core industry and believes HWL's ratings are comparable to those of other issuers with similar credit risk.

HWL is one of the largest Hong Kong-based conglomerates with a strong presence in Asia and Europe. Its six core businesses are: (1) ports and related services; (2) property and hotels; (3) retail; (4) telecommunications; (5) energy; and (6) infrastructure.