20210805-招银国际-GEMDAL_new_Issuance_-_We_see_FV_at_5__-_low_5__3页_481kb

CMBI Credit Commentary Summary

Core Content Overview

This document provides a credit commentary on Gemdale's new bond issuance, focusing on its financial performance, credit structure, and market outlook. It is issued by CMBI Fixed Income Department, which is part of CMB International Securities Limited, a subsidiary of China Merchants Bank. The report highlights the company's financial health, market position, and potential risks associated with its credit profile.

Key Information

• Bond Issuance Details:

  • Gemdale plans to issue a 3-year USD senior unsecured bond.
  • The interest rate is expected to be in the 5.60% area.
  • The bond is guaranteed by Gemdale's offshore subsidiary, Famous Commercial Limited (Ba3/BB-), with a keepwell deed from Gemdale Corporation (Ba2/BB).
  • The proceeds will be used to refinance existing near-term maturities.

• Fair Value Assessment:

  • The fair value of the new issue is estimated at 5% - low 5%.
  • This assessment is based on the credit curves of CIFIHG and LOGPH.

• Financial Performance (1H21):

  • Contracted sales reached RMB188.5bn in the first half of 2021, representing 67% of the full year target.
  • Sales increased by 54% year-over-year.
  • The company acquired 46 land parcels with a total value of RMB90bn, of which RMB50bn is attributable.
  • The acquisition value increased by 67% year-over-year.
  • Land acquisition was concentrated in T1 & T2 cities (60%), compared to 71% in FY20, reflecting the challenges of acquiring land in high-tier cities under the centralized land supply system.

• Credit Profile and Funding Structure:

  • Gemdale maintains a sound onshore financing structure with low funding costs (4.7% in FY20).
  • Its funding sources include bank loans (54%), onshore bonds (38%), offshore bonds (5%), and ABS (3%).
  • Net gearing, adjusted liabilities-to-assets, and cash/short-term debt ratios were 62.5%, 68.5%, and 121% respectively in FY20.
  • It is expected to remain in the Green camp this year, indicating a relatively stable credit position.

Main Points and Views

• Credit Risk Assessment:

  • The company's credit risk is moderate, with a Ba3/BB- rating for its offshore subsidiary and Ba2/BB for the parent company.
  • The fair value of the new bond issue is considered low, reflecting cautious market sentiment.

• Market Access and Regulatory Compliance:

  • Gemdale is compliant with the "3 red-line" regulations and has good onshore market access.
  • The report includes author certification, ensuring that the views expressed are independent and not influenced by compensation or conflicts of interest.

• Disclaimer and Risk Warnings:

  • The report includes important disclosures about the risks involved in investing in securities.
  • It emphasizes that the information provided is not tailored to individual investors and should not be used as a basis for investment decisions without consulting a professional financial advisor.
  • The report is intended for specific audiences, including major US institutional investors and Accredited Investors in Singapore, and is subject to legal restrictions on distribution.

Contact Information

• Glenn Ko 高志和: (852) 3657 6235 | glennko@cmbi.com.hk
• 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: fis@cmbi.com.hk
• CMB International Securities Limited: Tel: 852 3761 8867 / 852 3657 6291

Additional Notes

• The report is issued by CMBIS, a wholly owned subsidiary of CMB International Capital Corporation Limited.
• It includes a disclaimer stating that the information is not suitable for all investors and that CMBIS is not liable for any losses incurred from reliance on the report.
• The report is intended for specific recipients and is subject to legal and regulatory constraints on its distribution and use.