Hong Kong, April 13, 2012 -- Moody's Investors Service says that SPG Land (Holdings) Limited's 2011
results are generally consistent with its negative outlook.
"SPG Land exhibited weak contract sales in 2011, and that has affected
its liquidity and financial positions," says Kaven Tsang,
a Moody's Assistant Vice President and Analyst.
The weak sales were due to its focus on the Yangtze River Delta,
where home purchase restrictions had been strictly enforced.
Its RMB3.2 billion in contract sales only attained 49% of
its full year target.
As a result, Moody's downgraded its corporate family rating/senior
unsecured rating from Ba3/B1 to B1/B2 in November 2011.
SPG Land's liquidity position is marginal. It had RMB2.9
billion cash-on-hand at end-2011, which was
just sufficient to cover its RMB2 billion in short-term debt and
unpaid land premiums.
Moreover, its operating cash flow could be volatile in the next
12 months as its sales will still be challenged by the tight regulatory
controls.
"SPG Land also shows weak interest coverage, and this reduces
its financial flexibility," says Tsang.
SPG Land increased its debt leverage to fund its expansions in 2011.
As a result, its financial metrics - adjusted debt/capitalization
above 60% and adjusted EBITDA interest coverage ratio below 2.5x
-- had positioned it at the weaker end of its rating level.
Moody's expects SPG Land's adjusted EBITDA interest coverage to
stay at 2.0-2.5x over the next 12-18 months
as the company will likely maintain its high debt leverage to preserve
liquidity.
SPG Land's B1 corporate family rating continues to reflect the company's:
(1) land bank, which is mainly located in the affluent and fast-growing
Yangtze River Delta region and therefore benefits the company's
long-term development plans, and (2) solid track record in
developing large-scale housing and high-end integrated projects.
In addition, SPG Land continues to build up its investment portfolio.
Its recurring income grew 65% Y-o-Y to RMB260 million
in 2011, after Holiday Inn Kangqiao in Shanghai and Fraser Suites
in Suzhou commenced their operations.
The principal methodology used in rating SPG Land (Holdings) Limited was
the Global Homebuilding Industry Methodology published in March 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
SPG Land (Holdings) Limited is a Chinese property company that focuses
on the development of large-scale residential and integrated properties
in the Yangtze River Delta. The company has a land bank of 5.8
million square meters in gross floor area (GFA) across nine cities in
China. Around 70% of the land bank is spread across cities
along the Yangtze River, such as Shanghai, Suzhou, Wuxi,
Changshu, and Huangshan.
Listed on the Hong Kong Stock Exchange in 2006, SPG Land is majority-owned
and controlled by David Wang, the founder and chairman, who
has a 70% stake in the company.
Kaven Tsang
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Peter Choy
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's: SPG Land's 2011 results consistent with negative outlook