The corporate sector risk score is an aggregation of a) cyclicality b) ease of doing business and c) sector specific dynamics scores, and is intended to provide users with an overview of the major factors that impact GCR’s assessment of the relative risk of each sector.
Corporate Sector Risk Scores are assessed on a scale of between 0-13, and are a key factor in determining the operating environment component score for each Issuer. The core of the GCR Ratings Framework is based on GCR’s opinion that an entity’s operating environment largely frames its creditworthiness. As a result, the operating environment analysis anchors the underlying risk score for the GCR ratings criteria. GCR combines elements of the country risk and sectoral risk analysis, blended across countries for Issuers operating across multiple jurisdictions, to anchor a corporate to its current operating conditions. For more details, please read the related criteria and research listed below.
GCR will periodically publish updated “South African Sector Risk Scores”, which will supersede previous publications. The publication titled “South African Sector Risk Scores, 16 March 2020”, supersedes the publication “South African Sector Risk Scores, 05 December 2019”.
South African Corporates Sector Risk Scores
Property, Sector Risk Score 6.5
GCR considers the property sector to evidence moderate risk characteristics, supported by below average cyclicality, assets that continue to generate sound annuity income despite a weak operating climate, and sustained demand for well-positioned properties. Notwithstanding some of these inherent advantages, the South African property sector faces increased asset risk, with the potential for further property portfolio write-downs. Access to capital is also viewed to be weakening, as funds currently have limited ability to raise equity due to the very depressed stock market.
Against this backdrop, the slowing pace of asset disposals increases the risk that liquidity will not be available to stabilise leverage as valuations decline. GCR does not expect these heightened risks to impact the sector uniformly, but greater funding pressure is expected to be experienced by small to mid-tier funds exposed to more vulnerable income streams and higher debt levels. Greater resilience is nonetheless expected amongst conservatively leveraged funds with inherently better managed liquidity profiles and defensive annuity income.
Deputy Sector Head: Corporates
+27 11 784 1771
Sector Head: Corporates
+27 11 784 1771
Related criteria and research
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Real Estate Investment Trusts and Other Commercial Property Companies, May 2019
GCR’s Country Risk Score Report, Jan 2020
GCR’s South Africa Corporate Sector Risk Score Report, Dec 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.