Beijing Easyhome Investment Holding Group Co. Ltd.

The stable outlook reflects our view that Easyhome will maintain its solid market position and generate steady cash flows from its home improvement and furnishing retail outlets over the next 12 months. We expect the company's debt-to-EBITDA ratio to stay at about 6x because moderate growth in cash inflow will offset capital expenditure needs to buy back malls and develop self-owned malls. We could downgrade Easyhome if the company undertakes large and aggressive debt-funded acquisitions or if its cash flow significantly weakens from our base case, such that the EBITDA interest coverage is less than 2.0x or the debt-to-EBIDA ratio fails to stay at about 6.0x. We may raise the rating if the company meaningfully transitions toward becoming an asset

...Solid market position to stay in the home improvement and furnishing market in China. Beijing Easyhome Investment Holding Group Co. Ltd. (Easyhome) operates in China's fragmented home improvement and furnishings retail market, which had a size of Chinese renminbi (RMB) 3.3 trillion in 2018. This sector grew by 11.9% in 2018, outpacing GDP growth in China. As of Dec. 31, 2018, Easyhome has 11 self-owned, 75 leased, and 198 franchise malls across 149 cities in 29 provinces in China, making it the second-largest player in the industry by number of malls. The company's solid market position is supported by its operating track record of more than 20 years, strong network with stakeholders along the value chain, and diversified tenant pool of over 1,000 furniture retailers that include the majority of reputable furniture brands in China. Strong brand and scale give the company leverage to negotiate for long-term leases with property owners.Although Easyhome does not own most of its malls (70%...

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