20210708-招银国际-First_take_from_the_Corporate_Day_Jiayuan–Improving_credit_story_continues_3页_466kb

CMBI Credit Commentary Summary: Jiayuan

Core Content

CMBI maintains a "Buy" rating on Jiayuan (JIAYUA), despite the broader challenges in the Chinese high yield (HY) bond market and the property sector. The analysis highlights Jiayuan's ongoing credit improvement and strategic asset injection as key drivers for its positive outlook.

Main Points

• Credit Improvement:
  Jiayuan has shown consistent credit improvement over the past two months, outperforming the benchmark and other single B-rated names like ZHLGHD, SINHLD, and FTHDGR. The company is expected to remain a "green developer" under the "3-red-line" policy, which is a regulatory framework aimed at curbing excessive debt in the property sector.

• Financial Metrics:

  • Jiayuan guided to recognize revenue of RMB9bn for the first half of 2021, indicating a 5% YoY growth.
  • Full-year booking target is RMB19bn.
  • As of 2020, the company had a net gearing ratio of 60%, adjusted liabilities-to-assets ratio of 67%, and cash/short-term debts ratio of 1.3x.
  • The net gearing ratio is expected to drop to 50%-55% in the interim results.
  • Trust loans as a percentage of total borrowings will decrease to 15% (from 25% in 2020), which is a positive sign for its debt structure.

• Shandong Asset Acquisition:
  Jiayuan acquired profitable assets in Shandong province, including three projects in Qingdao and one in Weihai, through a combination of issuing new shares, convertible bonds (CBs), and cash.

  • The acquisition involved HKD2.77bn in new shares, HKD3.42bn in convertible bonds, and HKD1.05bn in cash.
  • The 5-year subordinated CBs are zero-coupon, with no investor put options, back-loaded yields, or cash redemption.
  • The major shareholder will convert the CBs into shares within 5 years, provided the free float is at least 25%.
  • The Shandong assets have a GFA of 1.62 million sqm and a NAV of HKD7.57bn, with a guided GPM of 37%.
  • These assets are expected to contribute RMB6.5bn in presales in 2021, significantly supporting Jiayuan's contracted sales growth.

• Refinancing Prospects:

  • Over the next 18 months, Jiayuan has USD250mn to USD580mn in total redemption requirements.
  • Key maturities include USD145mn in Mar'22, USD100mn in May'22, and USD200mn in Oct'22.
  • The company has USD230mn in offshore cash, and it is expected to maintain a liquidity ratio similar to 2020 (1.3x).
  • Investors with a notional position of ~USD100mn have indicated they do not intend to put the USD327mn puttable bonds due in Feb'23.
  • Management expects the average funding cost to decrease by 50-100bps due to the reduction in trust loans.

Key Information

• Credit Story: Jiayuan's credit story continues to improve, with a focus on reducing leverage and increasing asset quality.
• Liquidity Position: The company maintains a strong liquidity position, with sufficient offshore cash and the ability to manage its debt structure effectively.
• Strategic Acquisitions: The acquisition of Shandong assets is viewed as a credit-positive move, enhancing the company's financial profile and sales outlook.
• Market Conditions: Even in an unfavorable market environment, Jiayuan is expected to have adequate internal resources to meet its redemption obligations.

Conclusion

Jiayuan is positioned to benefit from its credit improvement, asset quality enhancement, and manageable refinancing profile. The company's strategic actions, including the Shandong asset acquisition, support its long-term growth and stability, reinforcing the "Buy" recommendation.

Disclaimer

This report is for informational purposes only and does not constitute investment advice. It is not an offer or solicitation to buy or sell any security. The information is subject to change and may not be accurate or complete. Investors are advised to consult with a professional financial advisor before making any investment decisions.

Important Disclosures

• The report is based on publicly available information and is not guaranteed to be accurate or complete.
• CMBIS may have investment banking relationships with the issuers mentioned, which could create conflicts of interest.
• The report is intended for specific audiences, such as major US institutional investors, and may not be distributed to others without prior consent.