20220325-招银国际-An_outperformer_despite_weaker_FY21_results_3页_424kb

CMBI Credit Commentary Summary - CIFIHG

Core Content

This document provides a credit commentary on CIFIHG (China International Financial Holding Group) and its related instruments, including CIFIHG perps (perpetuals). It outlines the current market position, financial performance, credit metrics, and investment recommendations for the company.

Main Views

• Performance Overview:
  CIFIHG has shown resilience, moving 7-13 points higher since the previous commentary on 10 March 2022. However, it remains 6-10 points lower than the beginning of March 2022, likely due to the impact of EM fund outflows on higher cash price bonds.

• Investment Recommendations:

  • Buy on CIFIHGs: The company is considered an outperformer despite weaker FY21 results. At current valuations, it offers good value for longer-term investors.
  • Hold on CIFIHG perps: The callable nature of these perpetuals (starting 24 August 2022) is not a priority for the company in the near term.

• Financial Performance in FY21 and FY22:

  • In FY21, CIFI's revenue increased by 50.5% to RMB107.8bn, driven by a 37% rise in GFA delivered.
  • Net core profit attributable to owners declined by 9.2% to RMB7.3bn, due to lower gross margin and a 66% drop in the share of profit from JCE and associates.
  • CIFI targets flat attributable contract sales in FY22 at around cRMB120bn, with an attributable ratio expected to remain around 50%.
  • The company aims to increase the attributable ratio to 70% over the medium term.
  • Asset-light businesses (e.g., property management, construction) are expected to drive income growth of 30-40% annually.

• Credit Metrics and 3 Red Lines:

  • CIFI has improved its key credit ratios, moving from yellow to green under the 3 Red Lines framework.
  • Assuming perpetuals as debt, CIFI's net gearing, cash/short-term debt, and adjusted liabilities/assets ratios improved to 65.9%, 2.6x, and 69.7% as of December 2021, respectively.
  • The company has a disciplined approach to fulfilling the 3 Red Lines and has partnerships with strong strategic investors for its joint ventures.
  • Less than 5% of its joint ventures are with distressed developers, and there is adequate cash to complete developments.

• Land Replenishment Strategy:

  • CIFI is likely to receive additional M&A loans (RMB15-25bn) from other banks, which will be excluded from 3 Red Lines estimates.
  • These loans will be benchmarked against PBOC rates and provide a competitive edge in land acquisitions.
  • The company continues to focus on deleveraging and lowering financing costs, and is expected to maintain a disciplined approach to land acquisitions (40% of attributable cash collection).

• Funding Access:

  • CIFI has continued to access various funding channels, including equity, onshore bonds, onshore loans, and USD bonds.
  • In December 2021, CIFI completed a rights issue to raise cUSD215mn.
  • In January 2022, it re-tapped CIFIHG 4.45% ’26 to raise USD150mn.
  • On 11 March 2022, CIFI issued onshore 2+2 MTNs of RMB1bn with a coupon rate of 4.75%.

• Maturity Profile:

  • CIFI maintains a low short-term debt-to-total debt ratio (15.6% as of December 2021).
  • The only remaining offshore public bonds in FY22 are dim sum bonds with an outstanding amount of cRMB1.5bn (cUSD230mn), due in April 2022.
  • There are no onshore bonds maturing or puttable in FY22.
  • The company is not expected to call the perps in the current market conditions.

Key Information

• Company Overview:
  CIFIHG is a major player in the property sector with a focus on asset-light businesses and M&A activities.

• Financial Highlights:

  • FY21 revenue: RMB107.8bn (+50.5%)
  • FY21 net core profit: RMB7.3bn (-9.2%)
  • FY22 attributable contract sales target: cRMB120bn
  • Targeted attributable ratio increase: to 70% in the medium term
  • Income growth from asset-light businesses: 30-40% p.a.

• Credit and Risk Management:

  • Improved credit ratios under 3 Red Lines.
  • Maintained low short-term debt exposure.
  • Strong cash reserves (RMB46.7bn as of December 2021) and escrow accounts (RMB16.7bn).

• Investment Outlook:

  • Buy recommendation for CIFIHGs.
  • Prefer '24s and '25s for a more balanced risk-return profile.
  • Hold recommendation for CIFIHG perps due to lack of immediate call priority.

Disclaimer and Important Disclosures

• Author Certification:
  The author certifies that the views expressed accurately reflect their personal views and that no part of their compensation is tied to the report's content.

• Trading Restrictions:
  The author and their associates did not trade in the covered stocks within 30 days prior to the report's issue and will not do so within 3 business days after.

• Risk Disclaimer:
  There are risks involved in trading securities. Past performance does not guarantee future results. The information is not tailored to individual investors and should not be considered as investment advice.

• Distribution Restrictions:
  The report is intended solely for the use of intended recipients and is not for public distribution. It may not be reproduced or shared without prior written consent from CMBIS.

• Jurisdictional Notes:

  • In the UK: Only for persons falling within Article 19(5) or Article 49(2) of the Financial Promotion Order.
  • In the US: Intended for major US institutional investors only.
  • In Singapore: Distributed by CMBISG, an Exempt Financial Adviser, and subject to legal responsibility for non-accredited investors.