S&P Global believes the conglomerate will maintain its strong cash flow for at least the next two years.
Jardine Matheson Holdings has received its first S&P rating, with a stunning A+ stable outlook.
The proposed US bonds rate of the conglomerate was also rated A+.
“We expect Jardine Matheson Holdings Ltd. to maintain its strong cash flows over the next 24 months, given its diversified portfolio of long-term assets across Asia that has remained resilient through business cycles,” S&P said in a statement.
The credit rater said its diversified business portfolio across Asia would support a resilient earnings profile for the coming years.
“Our base cases assume Jardine Matheson’s adjusted EBITDA will largely recover to 80%-90% of the pre-pandemic level in 2021, and over 90% in 2022,” it added.
On financial policy, S&P said Jardine Matheson will likely stay conservative in the coming years.
With the company’s balance sheet, cash flow and financial policy, S&P expects it to weather risks and disruptions surrounding the COVID-19 pandemic.
“The stable outlook on Jardine Matheson reflects our expectation of gradual growth at operating subsidiaries, some divestments of non-core assets, and curtailment of acquisitions and share repurchases over the next 24 months. These factors together will likely gradually reduce the group’s debt leverage to below 2x. Our base case assumes the group’s adjusted EBITDA will recover to 80%-90% of pre-pandemic levels in 2021 and grow 6%-10% in the next two to three years,” S&P concluded.
Stronger business fundamentals combined with low leverage could lead to a higher score in the future, while higher risk appetite could lower it.
Earlier this month Jardine Matheson announced its plans to simplify the parent company structure of the group by acquiring by cash 15% issued share capital of Jardine Strategic Holdings that it does not already own. This will take effect in April 2021.