20210707-招银国际-First_take_for_Corporate_Day__Dafa_-_An_outperformer_in_pre-sales_3页_414kb

CMBI Credit Commentary Summary

Core Content

This credit commentary from CMBI Fixed Income Department focuses on the financial performance and credit outlook of Dafa (DAFAPGs). The report highlights the company's resilience in the face of market volatility and its potential to benefit from the re-opening of capital markets. Despite challenges in USD bond refinancing, the firm maintains a "Buy" rating on Dafa due to its strong liquidity position.

Key Financial Performance

• Contract Sales in 1H21: Dafa reported contract sales of RMB25.8bn, representing 72% of its RMB36bn target for the year.
• Cash Collection Rate: Achieved a 90% cash collection rate (compared to 60% for same-year sales), resulting in RMB10.5bn in cash inflows.
• Gross Margin: The gross margin for 1H21 contract sales was in line with historical levels (20-22%).

Credit Profile and Red Lines

• Red Line Status: Dafa was in the green camp under the "3 red-lines" policy, with net gearing at 61%, adjusted liabilities-to-assets ratio at 69%, and cash/short-term debt ratio at 143%.
• Confidence in Green Status: The company is confident to maintain its green camp status based on its 1H21 performance.

Refinancing and Funding Strategy

• USD Bond Refinancing: Dafa is applying for NDRC quota to refinance its USD bonds maturing in July 2021, January 2022, and July 2022. It is also exploring alternative funding sources such as bank loans.
• Onshore Funding: Dafa repaid RMB780mn in trust loans in 1H21, reducing its onshore trust and construction loans maturing in FY21 to below RMB1bn.
• Funding Costs: Onshore funding costs for trust and construction loans did not change materially in 1H21.
• Liquidity Outlook: The firm expects Dafa to maintain a cash/short-term debt ratio above 100%, with positive free cash flow for FY21, indicating adequate liquidity despite potential challenges in issuing new bonds.

Investment Outlook

• Buy Rating: CMBI maintains a "Buy" rating on Dafa, citing its resilient performance and strong liquidity.
• Disciplined Spending: Dafa is expected to remain disciplined in maintaining land premium payments at 50% of cash collection, even if it revises its land acquisition budget.

Disclaimer and Legal Information

• Author Certification: The author certifies that the views expressed reflect personal opinions and that there is no direct or indirect compensation tied to the report's content.
• Conflict of Interest: CMBI may have investment banking relationships with the companies discussed, which could affect the report's objectivity.
• Distribution Restrictions:
  • UK: Only available to persons under Article 19(5) or Article 49(2) of the Financial Services and Markets Act 2000.
  • US: Intended for "major US institutional investors" only; not for general distribution.
  • Singapore: Distributed by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser, and may be subject to legal responsibility for non-accredited 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
• CMBI Fixed Income Department: fis@cmbi.com.hk
• CMBIS Contact: Tel: 852 3761 8867 / 852 3657 6291

Additional Notes

• The report may be subject to change without notice.
• CMBIS may issue other reports with different conclusions or information.
• Investors are advised to consult professional financial advisors before making investment decisions.