Moody's downgrades Citic after China strategy shift
Ratings agency Moody's Investor Services has put Citic Pacific on a negative rating watch following the conglomerate's continued investment shift away from Hong Kong to China.
Moody's said yesterday it had changed its ratings outlook on Citic Pacific's Baa3 issuer rating and its senior unsecured bonds to negative from stable, citing risks that a continued shift in business focus northwards could pose an earnings gap.
The downgrade came after Citic Pacific sold its 50 per cent stake in Festival Walk, a prime shopping centre in Kowloon Tong, for $6.2 billion, and said last Friday that it planned to invest the proceeds in a 49 per cent stake in a Shanghai Shipyard Land Development project, valued at a projected $21.1 billion over three phases.
In contrast to the negative reaction from Moody's, analysts who have long criticised the company for lacking a focal point, welcomed the move to become more business oriented.
However, some said more needed to be done as the company had claimed it would now commit to infrastructure-related investments.
'Investors have called our strategy into question, saying it is too diversified. We are now in the process of refocusing our investment profiles,' managing director Henry Fan Hung-ling told the South China Morning Post.
Mr Fan said the company had restructured in non-core business areas, such as the financial and pharmaceuticals businesses. He did not rule out a possible spin-off or sale of non-core businesses, though he said this was not imminent.
'The Shanghai Shipyard property deal is okay, bearing in mind that the capital injection need only be done over a long period,' said an analyst from a French investment bank that rates Citic Pacific 'outperform'.
Mr Fan said the deal represented a rare opportunity since the project was in the last and largest prime site along the banks of the Huangpu river.
Meanwhile, Yvonne Liu writes in a report that Citic Pacific was braced to sell a residential-commercial site in Cheung Sha Wan after quitting its Festival Walk stake.
A surveyor estimated the site was valued at about $1.3 billion.
Sources familiar with the proposal said Citic Pacific had assigned DTZ Debenham Tie Leung to handle the tender, which is expected to close next month.
Neither Citic Pacific nor DTZ Debenham Tie Leung would comment yesterday.
The development site is at 500-502 Tung Chau Street, near Cheung Sha Wan MTR station.
The 35,629 square feet site will comprise two 40-storey residential towers, providing 326 flats with a gross floor area of 320,000 sqft.
Change of plan
Outlook revised after sale of Festival Walk shareholding
Analysts welcome move to become more business focused
Company says Shanghai deal offers rare chance at prime site
