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Announcement:

Moody's: SPG Land's 2011 results consistent with negative outlook

 The document has been translated in other languages

Global Credit Research - 13 Apr 2012

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
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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