20210713-招银国际-First_take_from_Corporate_Day__Central_China_-Weak_contracted_sales_year-to-date_4页_431kb

CMBI Credit Commentary Summary: Central China Developers

Core Content Overview

This credit commentary provides an analysis of CENCHI (Central China Developers), focusing on its contracted sales performance, financial position, and credit outlook. It also highlights the company's strategic initiatives and refinancing plans.

Main Points

1. Credit Rating Outlook

• Credit View: CMBI maintains a Neutral credit view on CENCHI's curve.
• Reasoning: Despite outperforming other Chinese developers in the past two months, CENCHI's contracted sales growth has been weak year-to-date, and there are concerns about its execution risk in expansion beyond Henan.
• Credit Deterioration Risk: The weak sales performance may lead to a credit deterioration trajectory, though it is expected to be gradual.
• Maturity Structure: CENCHI's staggered bullet maturity in the next 12 months (RMB1.5bn in Jul '21, USD400mn in Nov '21, USD500mn in Aug '22) could help prevent material widening of its credit curve.

2. Contracted Sales Performance

• 1H2021 Growth: CENCHI recorded a +5% yoy increase in contracted sales, reaching RMB 31bn, which is 39% of its full-year target.
• Full-Year Target: The company maintains a RMB 80bn full-year contracted sales target.
• Sell-Through Rate: The sell-through rate was low at 50%-60% in 1H2021.
• Saleable Resources: With RMB 110bn saleable resources for the full year, CMBI expresses reservation about the company's ability to meet its contracted sales goals.

3. Financial Performance and Guidance

• Revenue Growth: CENCHI guides for 20% yoy revenue growth in 1H2021, similar to its full-year 2021 target.
• Gross Margin: Expected to remain around 19.9%, consistent with FY20 performance.
• Strategic Expansion: The company has signed an MOU to acquire a 65% stake in a real estate project company in Xi'an, with a consideration of RMB 800mn–RMB 1bn, aimed at boosting contracted sales by RMB 4bn–RMB 5bn in 2H2021.

4. Refinancing Plan

• Offshore Bond Issuance: CENCHI is expected to refinance USD400mn due in November 2021 through an offshore bond issuance.
• Current Offshore Cash: The company has USD 100mn in offshore cash available.
• NDRC Quota: The USD670mn NDRC quota is a key factor in the refinancing plan.

5. Financial Ratios

• Net Gearing: 13.6% as of Dec'20.
• Adjusted Liabilities-to-Assets Ratio: 85.5%.
• Cash/Short-Term Debt Ratio: 148.2%.
• Credit Camp: Based on these ratios, CMBI expects CENCHI to remain in the yellow camp under the "3 red-line" framework.

Key Information

• 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
  • Department: CMBI Fixed Income | fis@cmbi.com.hk

• Company Background:

  • CMBIS is a wholly owned subsidiary of CMB International Capital Corporation Limited, which is itself a subsidiary of China Merchants Bank.

• Author Certification:

  • The views expressed in the report reflect the personal views of the author.
  • No compensation is directly or indirectly related to the specific views expressed.

• Important Disclosures:

  • The report is not an offer or solicitation to buy or sell securities.
  • No liability is assumed for any loss or damage resulting from reliance on the report.
  • The information is based on publicly available data and is subject to change without notice.
  • CMBIS may have investment banking relationships with the companies discussed, which could create conflicts of interest.

• Distribution Restrictions:

  • The report is intended for specific investors and may not be distributed to others without consent.
  • UK and US recipients are subject to specific legal and regulatory restrictions.
  • Singapore recipients should contact CMBISG for any matters arising from the report.

Conclusion

CENCHI faces challenges in contracted sales and execution risk in expansion, but its staggered maturity structure and refinancing plans may help mitigate credit risks. The company's financial ratios place it in the yellow camp, indicating moderate credit risk. CMBI remains Neutral on its credit curve, with caution regarding its sales performance and potential credit deterioration.