S&P Global Ratings revised its rating outlook on Sun Hung Kai Properties (HKG:0016) to negative from stable as the Hong Kong-based developer's margins and leverage continue to weaken in the next 12 to 24 months due to dampened housing prices.

The developer's adjusted EBITDA margin dropped to 45.75% in fiscal 2024 from 48.7% in fiscal 2023 amid a 75 decline in home prices in Hong Kong between January and mid-September.

The company's debt-to-EBITDA ratio may temporarily increase to 3.5x, which is S&P's downside trigger, according to a Tuesday release.

The company could channel its large cash proceeds from property development sales and rental income in relieving debt and pushing leverage between 3.3x and 3.5x from fiscals, 2025 to 2027, S&P said.

The rating agency also expects the company to be conservative in purchasing land, with an expected spending of between HK$6 billion and HK$7 billion annually for fiscals, 2025 to 2027.

The rating agency affirmed Sun Hung Kai's A+ long-term issuer credit rating and the A+ issue ratings on its guaranteed senior unsecured notes.

A lower rating would be possible if the real estate market erodes significantly and the company's sales and margin are markedly below expectations.

Meanwhile, an outlook revision to stable will hinge on the company's sales and margins falling close to expectations as well as controlled debt.

Shares of the company fell more than 4% in recent trade.

Price (HKD): $86.45, Change: $-4.3, Percent Change: -4.79%