20210707-招银国际-First_Take_from_Corporate_Day__Greenland_HK-Just_one_USD_note___one_perp_outstanding_after_July__21_4页_432kb

CMBI Credit Commentary Summary

Core Content Overview

This document provides a credit commentary on Greenland HK, focusing on its debt structure, financial performance, and future outlook. It outlines the current state of its debt obligations, sales targets, and financing strategies, while also including important disclosures and author certifications.

Key Financial Highlights

• Debt Structure:

  • After repaying the GRNLHK 6 '21 bond on 17 July 2021, Greenland HK will only have one USD bond/bullet debt outstanding: GRNLHK 9.625 ’Jun22 (YTM: 15.6%).
  • As of end-2020, Greenland HK has a net debt/equity ratio of 53% and a gross debt/revenue ratio of 0.75x, with a total gross debt of RMB25.5bn.
  • The company has prepared funding for the USD 300m bond due on 17 July 2021, with USD150m already pre-funded via a 364D note issued the previous month.

• Sales Performance:

  • In Jan-May 2021, Greenland HK achieved contracted sales of RMB13.7bn, representing a 34% yoy increase, but only 23% of its annual sales target of RMB60bn.
  • Management remains confident in the RMB60bn annual sales target, expecting 1H2021 to reach 1/3 of the target and 2H2021 to catch up.
  • The company has RMB80bn of saleable resources and has acquired 10 projects for RMB13.8bn in 1H2021, which are expected to be launched within the year.
  • The full year land acquisition budget is RMB24bn, with flexibility to adjust based on market conditions.

• Financing Strategy:

  • Greenland HK has limited trust financing and remaining low USD bond obligations.
  • The company is exploring mortgage receivables as asset-backed financing to broaden its financing channels, which are becoming increasingly narrow.
  • It has decided not to call its USD 120m Perp on 26 July 2021 to preserve its NDRC quota for offshore financing, especially in light of potential USD bond market volatility.
  • The Perp will have a yield of T5 + 9.5% (~500bp step-up) after the call date, which is significantly higher than the current secondary market yield (double-digit level).

Main Views and Insights

• The company is in a debt reduction phase, with only one USD bond remaining after the repayment of GRNLHK 6 '21.
• Despite a lag in contracted sales, management remains optimistic about meeting the annual sales target due to saleable resources and new project launches.
• The decision not to call the Perp is strategic, aimed at maintaining offshore financing flexibility in uncertain market conditions.
• Funding readiness for the upcoming USD bond is confirmed, with pre-funding from recent note issuance.
• The company is actively exploring alternative financing options, including asset-backed financing, to address its narrowing funding channels.

Important Disclosures

• Author Certification:

  • The views expressed reflect the personal opinions of the author.
  • The author has no financial interest in the securities or issuer covered.
  • No compensation was directly or indirectly related to the views expressed.

• Distribution Restrictions:

  • The report is intended for institutional investors and not for retail investors.
  • It is not an offer or solicitation to buy or sell any securities.
  • No liability is assumed for any loss or damage resulting from reliance on the report.

• Legal and Regulatory Compliance:

  • The report is subject to change and not guaranteed in accuracy or completeness.
  • CMBIS may have conflicts of interest and proprietary positions that could affect the report's objectivity.
  • Distribution is restricted in certain jurisdictions, including the United Kingdom and United States, to specific categories of investors.

Contact Information

• Polly Ng 吴宝玲: (852) 3657 6234 | pollyng@cmbi.com.hk
• Wilson Lu 路伟同: (852) 3761 8918 | wilsonlu@cmbi.com.hk
• James Wen 温展俊: (852) 3757 6291 | jameswen@cmbi.com.hk
• CMB International Securities Limited:
  • Fixed Income Department
  • Tel: 852 3761 8867 / 852 3657 6291
  • Email: fis@cmbi.com.hk
  • CMBIS is a wholly owned subsidiary of CMB International Capital Corporation Limited, which is a subsidiary of China Merchants Bank.

Summary

This credit commentary highlights Greenland HK's debt restructuring, sales performance, and financing strategy. The company is in a debt reduction phase, with only one USD bond remaining. Despite a lag in sales, it maintains a positive outlook on meeting its annual target. The strategic decision to not call its upcoming Perp aims to preserve offshore financing capacity, while the company is exploring alternative financing options to support its growth. The report includes important disclosures regarding the author's certification, distribution restrictions, and legal compliance.