Home Lands Skyline gets ‘A’ rating from Fitch on strong cash flows

Fitch Ratings this week assigned Home Lands Skyline (Pvt.) Limited (HLSL) with a first time rating of ‘A’. with a Stable outlook. considering the improving cash collections in the next two years from the contracted sales of its houses but said downside risks remain from the challenging macroeconomic climate, which could dampen the timely cash collection and project completion. 

HLSL is a leading property developer in the middle-income segment, selling homes priced between Rs.15 million and Rs.30 million to the consumers looking for modern living conditions in suburban areas. 

The company’s projects stand out because it operates in the suburban settings compared to most of its competitors operating in the crowded urban market with little differentiation unless catering to the high-end buyers. 
The company is also focused on the concept of ‘themed resort living’, where each project is based on a particular recreational activity and necessary infrastructure. 

Sri Lanka’s housing real estate market suddenly became red-hot during the two years of the pandemic with the ultra low interest rates and record liquidity, which buoyed the buyers and the
developers alike. 

According to a recent survey carried out by Lankapropertyweb Research, Sri Lanka’s premier online marketplace for real estate of all kinds, apartment and housing prices hit the highest level in the final quarter in 2021 from nearly 10 years ago. 

For instance between 4Q 2021 and 2020, the apartment values have increased by 17.68 percent with the selling price of a three bedroom unit in Colombo having risen by 24.11 percent. 

This sent the property developers of all scales and markets to a much stronger level financially, the financial data of the listed property developers showed. 

HLSL has been in the home building business since 2014 but its land sales business is more than 20 years old. 
The company currently has a pipeline of around 1,500 of new housing units in the next three years compared to 2,000 units sold since 2014. When it comes to land, it has a land bank sufficient for around three years of contracted sales at the current scale, Fitch said. 

While the company has a cash flow forecast of Rs.10.3 billion in the FY23 and Rs.14.1 billion in FY24, compared to Rs.9.5 billion in FY22, the rating agency cautioned that it could get dampened due to the near-term challenges from the weak domestic economy reflected in the rising inflation, rising interest rates and difficulties in importing raw materials, which could also affect
project completion. 

In the same vein, Fitch said the company’s “healthy financial profile provides a buffer against these risks in the next 12-18 months”.