OREANDA-NEWS. March 31, 2015. Fitch Rating says today that Sunac China Holdings Limited's (Sunac; BB-/Positive) leverage, as measured by net debt/adjusted inventory, at end-2014 remained low at 0.30x, giving the property developer room in its ratings to undertake acquisitions to expand its business.

Sunac's leverage fell from 0.34x at end-2013 even though its sales continued to increase - by 30% in 2014 after growth of 61% in 2013.

Sunac has said it intends to make two acquisitions that may be completed in 2015. It plans to acquire project companies held by subsidiaries that it partners with Greentown China Holdings Limited. The impact on Sunac's leverage from this transaction will be low as Fitch has in the leverage calculation included Sunac's CNY4.6bn non-controlling interest as debt. The transaction will reduce cash and non-controlling interest, and thus result only in a small increase in net debt.

Sunac is also undertaking a conditional purchase of a 49.25% stake in Kaisa Group Holdings Limited, held by its founder's family trust. The pressure on Sunac's leverage will be greater in this acquisition but it also brings about material enhancement to Sunac's business profile. The cash outlay may range from HKD4.6bn for the 49.25% stake purchase only, to HKD8bn if the conditional mandatory offer for all Kaisa shares is fully accepted. Sunac had also in February 2015 agreed to acquire Shanghai development projects from Kaisa for CNY2.4bn. If Sunac's acquisition of Kaisa and the Shanghai projects is successful, its leverage may rise to close to 0.50x level.

Fitch is likely to maintain the Positive Outlook on Sunac's ratings if the Kaisa acquisition can bring about a sustained increase of Sunac business scale and better geographical diversification; while leverage remains at 0.40x-0.50x on a sustained basis.