(The following statement was released by the rating agency)
Jan 02 - Standard & Poor’s Ratings Services said today that its rating on China Merchants Holdings (International) Co. Ltd. (CMHI: BBB/Stable/—; cnA/—) is not affected by the company’s recent acquisition of stakes in various ports and the deconsolidation of China Nanshan Development (Group) Incorporation (CND).
In our view, CMHI’s actions are in line with its strategy of focusing on its port business. We expect the company to maintain financial discipline while pursuing domestic as well as overseas investment opportunities to expand its port business. We anticipate that CMHI will largely use its operating cash flow and cash balance to fund the acquisitions.
We expect CMHI’s acquisition of a 23% stake in operating port assets in Djibouti in eastern Africa to contribute to its steady cash flow. We also expect the company’s investment in a 10% stake in Taiwan Kao Ming Container Terminal to help cement its relationship with key clients. CMHI announced that it will increase its holding in Shenzhen Chiwan Wharf Holdings Ltd. (not rated) by 25%, and has an entrustment agreement with CND on CND’s shares in Chiwan Wharf. This will give CMHI effective management and control over Chiwan Wharf, facilitating the integration of CMHI’s ports in West Shenzhen and enhancing its competitiveness.
The deconsolidation of CND will enable CMHI to maintain stable financial metrics, in our opinion. CND operates substantial non-port related businesses, such as property development, which we view as more volatile and highly leveraged compared with CMHI’s port business.