Hong Kong, August 19, 2020 -- Moody's Investors Service has affirmed Beijing Capital Land Limited's
(BJCL) Ba3 corporate family rating (CFR).
At the same time, Moody's has affirmed the following ratings
of BJCL's subsidiaries:
1. The B1 CFR of International Financial Center Property Ltd.
(IFC)
2. The provisional (P)B1 backed senior unsecured rating on the
medium-term note (MTN) program of Central Plaza Development Ltd.
(CPD).
The MTN program is guaranteed by IFC, and supported by keepwell
deeds provided by BJCL. Both CPD and IFC are wholly-owned
subsidiaries of BJCL.
The outlooks for all abovementioned companies are stable.
"The ratings affirmation reflects our expectation that BJCL's operating
performance will remain largely stable," says Kaven Tsang,
a Moody's Senior Vice President.
"At the same time, we expect BCG's willingness and ability
to provide support to BJCL will remain unchanged," adds Tsang.
RATINGS RATIONALE
BJCL's Ba3 CFR reflects its standalone credit profile and a two-notch
uplift, based on Moody's expectation that BJCL will continue
to receive strong financial and operating support from BCG in times of
need, given its strategic and economic importance to its parent.
BJCL's standalone credit profile considers the company's (1) medium-sized
operations, (2) quality land bank in top tier cities, (3)
good access to projects with government support, and (4) high debt
leverage.
Moody's expects BJCL's contracted sales will stay around RMB80
billion in the next 12-18 months, similar to that in 2019,
despite a 17% drop in H1 2020 to RMB34 billion due to the disruption
caused by the coronavirus outbreak.
Moody's expects the company will accelerate its sales plan with
new launches in Hangzhou, Suzhou, Shanghai, Kunming
and Zhengzhou in H2 2020.
BJCL's revenue/adjusted debt should slightly improve to 21%-23%
in the next 12-18 months from 2019's 18%, as
revenue growth will outpace a mild increase in debt. The latter
is a result of the company's scaling back of land acquisitions in
an attempt to control its debt leverage.
However, BJCL's EBIT/interest coverage ratio will fall slightly
to 1.25x-1.40x in the next 12-18 months from
1.45x in 2019 because a decline in its margin will more than offset
the effect of revenue growth. Nevertheless, these credit
metrics remain appropriate for BJCL's standalone credit profile.
BCG has an ability to provide support to BJCL, as reflected by its
Baa3 issuer rating and Moody's expectation that the company will
achieve gradual deleveraging and an improvement in its standalone credit
profile in 2021.
The two-notch rating uplift considers BCG's track record of (1)
supporting BJCL to secure good-quality projects, particularly
in Beijing, (2) asset injections, and (3) financial support,
such as guarantees that cover the repayment of BJCL's onshore debt and
keepwell deeds provided by BCG to support the MTN program of CPD that
is guaranteed by IFC.
BJCL's liquidity is adequate. Moody's expects the company's
cash holdings, together with its contracted sales proceeds after
deducting basic operating cash flow items, can meet its refinancing
needs and committed land payment over the next 12-18 months.
BJCL also has good access to onshore and offshore capital markets,
given its state-owned enterprise background.
Moody's also affirmed IFC's B1 CFR.
IFC's B1 CFR reflects its standalone credit strength and a one-notch
rating uplift, based on expected financial and operating support
from its parent, BJCL and the ultimate parent, BCG,
if needed.
IFC's standalone credit strength reflects its small-scale operations,
thin capital base, and weak financial metrics.
Moody's assessment of a likely support from BJCL and BCG is based on:
(1) BJCL's 100% ownership of IFC, and (2) their track
record of providing financial support to IFC.
IFC's liquidity is adequate. Moody's expects the company's
cash holdings and operating cash flow will meet its refinancing needs
over the next 12-18 months.
When assessing BJCL's governance risk, Moody's has considered
the company's (1) majority ownership by BCG, which is under the
supervision and monitoring of Beijing Municipal government; and (2)
the disclosure requirement and the corporate governance standard under
the Corporate Governance Code for companies listed on the Hong Kong Exchange.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
BJCL's stable outlook reflects Moody's expectation that (1)
the company's credit metrics will remain largely stable, and (2)
the likelihood of support from BCG will remain unchanged over the next
12-18 months
Moody's could upgrade BJCL's rating if (1) BJCL demonstrates stable sales
growth, (2) it adopts a more prudent approach to land acquisition,
(3) it improves its EBIT/interest coverage above 2.5x, and
(4) BCG's standalone ability to provide support to BJCL strengthens.
However, BJCL's rating could come under downward pressure if the
company's (1) contracted sales weaken, (2) profit margin declines
materially, (3) liquidity position becomes impaired, or (4)
financial metrics weaken, with EBIT/interest coverage falling below
1.25x-1.50x on a sustained basis.
A downgrade of BCG or any evidence of weakening support from BCG will
also strain BJCL's rating.
IFC's stable outlook reflects Moody's expectation that (1) the company's
business profiles will remain stable, and (2) the likelihood of
support from BJCL and BCG will remain unchanged over the next 12-18
months.
Moody's could upgrade IFC's rating if (1) it improves its
scale and geographic diversification and, in turn, reduces
the volatility in its sales and earnings, (2) it improves its financial
profile, and (3) BJCL's and BCG's ratings are upgraded.
On the other hand, a downgrade of BJCL's rating will result in a
similar downgrade of IFC's rating.
In addition, any evidence of weakening support from BJCL and BCG,
or a reduction in the strategic importance of IFC to BJCL and BCG,
could be negative for the company's rating.
The principal methodology used in these ratings was Homebuilding And Property
Development Industry published in January 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1108031.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Incorporated in China, Beijing Capital Land Limited (BJCL) is a
residential property developer. BJCL was founded in 2002 as the
major property arm of its parent, Beijing Capital Group Co.,
Ltd. (BCG). BJCL listed on the Hong Kong Stock Exchange
in 2003. BCG is BJCL's largest shareholder, with an equity
interest of 54.47% as of 30 December 2019. The Government
of Singapore Investment Corporation is also a major shareholder,
with a 4.02% stake in the company as of the same date.
Incorporated in the British Virgin Islands in 2000, International
Financial Center Property Ltd. (IFC) is a fully owned subsidiary
of BJCL. IFC is an overseas investment holding company that owns
property development projects in China.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Kaven Tsang
Senior Vice President
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
Client Service: 852 3551 3077
Franco Leung
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 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
Client Service: 852 3551 3077
