New York, March 22, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated (entities) listed below.
The review was conducted through a portfolio review discussion held on 15 March 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
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This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for these rated entities was Construction published in September 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Construction
Scale: Scale is an indicator of a company's market strength, importance to markets served and ability to weather the vagaries of capital and economic cycles. Scale can also provide a broader platform for sustainable earnings and cash flow generation and typically enhances a construction company's operating and financial flexibility and its ability to bid, finance and profitably execute large, long-term, and complex projects. Large construction companies can accommodate a broad range of construction needs since they typically maintain a sizeable network of subcontractors and obtain various sources of financing, including bonding lines, which are key competitive advantages in the industry. In addition, scale in the construction industry often has a bearing on other key considerations such as geographic and segment diversity. Total revenue and EBITA are indicators of scale.
Business Profile: The business profile of a construction company influences its ability to generate sustainable earnings and operating cash flows. Diversification across several continents or economic regions and exposure to a number of uncorrelated segments can mitigate earnings volatility, which can be affected by cyclical swings, changing levels of competition and project performance. Consideration is given to operational and geographic diversity, technical capabilities, track record of project execution, and stability of revenues and margins.
Leverage and Coverage: Leverage and coverage measures are indicators of a company's financial flexibility and long-term viability. These measures can serve as an indicator of a greater ability to make new investments, weather the vagaries of the business cycle and respond to unexpected challenges, which often occur in the construction industry given the periodic performance issues that arise. Some measures of leverage and coverage include: EBITA / Interest Expense, Debt / EBITDA, and Funds from Operations / Debt.
Financial Policy: Management and board tolerance for financial risk is considered because it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Considerations can include a company's public commitments in this area, its track record for adhering to commitments, and our views on the ability for the company to achieve its targets.
Other Considerations: Some other considerations may include: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends can also be considered.
• China Communications Construction Co., Ltd.
• China Energy Engineering Corporation Limited
• China Gezhouba Group Company Limited
• China Gezhouba Group Corporation
• China Metallurgical Group Corporation
• China Railway Construction Corp Ltd
• China Railway Group Limited
• China State Construction Engineering Corp Ltd
• China State Construction Int'l Holdings Ltd
• CIMIC Group Limited
• KEPCO Engineering & Construction Co, Inc.
• Metallurgical Corporation of China Ltd.
• Power Construction Corporation of China
• Shanghai Construction Group Co., Ltd.
• SINOPEC Engineering (Group) Co., Ltd.
• Ventia Services Group Limited
The principal methodology used for these rated entities was Government-Related Issuers Methodology published in February 2020. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Government-Related Issuers Methodology
Assigning a Baseline Credit Assessment (BCA): The majority of Government-Related Issuers (GRIs) begin with an assessment of the GRI's standalone strength (i.e. BCA) – its ability to service and repay outstanding debt without recourse to extraordinary support from the supporting government - using the published sector-specific methodology that is most suitable for the predominant activities of the GRI. Our assessment of standalone strength includes any day-to-day support received from the government that can be clearly distinguished from extraordinary support. Support mechanisms, such as an obligation of the government to ensure the GRI's solvency and liquidity, are reflected in the BCA when they are legally or contractually documented.
Government uplift: The GRI's ratings include any uplift due to systemic support and typically focus on three structural factors and three factors explaining the level of the government's willingness to provide support. Structural factors address the legal and quasi-legal aspects of the government's relationship with the GRI and include: (1) guarantees, (2) ownership level and (3) barriers to support. The factors underlying willingness consider the softer connections between the two entities and include (4) the likelihood of government intervention, (5) political linkages and (6) economic importance. Support is determined using a joint default analysis framework which considers an estimate of the likelihood of extraordinary support, an assessment of the credit quality of the supporting government, and default correlation between the two entities.
GRIs without a BCA: In limited instances, it is not possible or meaningful to assign a BCA. The GRI is so inextricably linked to the government that a meaningful standalone BCA cannot be derived. In such cases, a top-down analytical approach is used that chiefly considers the ability and willingness of the government to provide timely support, instead of the usual bottom-up approach of starting with the BCA and then considering uplift towards the government's rating.
• Bright Food (Group) Co., Ltd.
• Hainan State Farms Investment Hldg Grp Co Ltd
• Korea Land and Housing Corporation
• Power Construction Corporation of China
• Shanghai Lingang Economic Dev. (Grp) Co., Ltd
The principal methodology used for these rated entities was Homebuilding and Property Development Industry published in January 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Homebuilding and Property Development Industry
Scale: Scale reflects size, market position and brand name. Being among the largest and leading players in numerous markets can provide better access to skilled subcontractors and bank financing, first choice among land deals, greater purchasing, and pricing power, while at the same time offering stronger staying power and better financial and operational flexibility during a downturn. Furthermore, large companies tend to have broad geographic coverage, which also offers them the benefits of geographic diversification. In high growth markets, large residential property developers tend to have apparent benefits over smaller players including easier access to bank financing and strong financial power to bid for land in good locations. Total Revenue is an indicator of scale.
Business Profile: Business profile is considered, typically including an assessment of operating position, business and acquisition strategies, product mix, geographic diversity, execution ability, area of operation and product mix. Considerations may include business strategy; market position; product, price-point, and geographic diversity; inventory management; land strategy, including the percentage of owned vs. optioned land; degree of speculative construction vs. under contract; as well as use of off-balance sheet structures.
Profitability and Efficiency: Profitability is an indicator of the success of the business and effectiveness of management as well as the company's ability to support operations and business growth. Profitability is estimated by gross margins that include interest charged to cost of goods sold and exclude land impairment charges so as to focus on current profitability and efficiency.
Leverage and Coverage: Leverage and coverage is considered, as is sufficient financial flexibility to deal with market or regulatory developments which lead to shocks to their business and finances. Measures of leverage and coverage can include: EBIT-to-Interest, Revenue-to-Debt, and Debt-to-Total Capitalization.
Financial Policy: Management and board tolerance for financial risk is considered, as it may affect debt levels and credit quality as well as the risk of adverse debt leverage movements. Financial policies provide a guide to the appetite of a company's governing board and management for risk and the likely future direction for the company's capital structure. Key issues include debt leverage, coverage and return targets, liquidity management, cash distributions to shareholders, and acquisition strategies.
Other Considerations: Other considerations can include: regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies, and macroeconomic trends.
• Korea Land and Housing Corporation
• Lendlease Group
• Shanghai Lingang Economic Dev. (Grp) Co., Ltd
• Sinochem Hong Kong (Group) Company Limited
The principal methodology used for these rated entities was Gaming published in June 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Gaming
Scale: Scale is considered because it is an indicator of the overall depth of a company's business and its success in attracting a variety of customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. Large-scale gaming companies tend to have greater market share and better access to capital compared with smaller-scale companies. Large companies may also benefit from economies of scale with respect to research and development expenses and corporate overhead. Companies with greater scale generally have lower earnings volatility relative to smaller companies because of the lower risk that a single customer can "take the house" for a large sum with a few significant bets. A larger scope of operations can reduce a company's reliance on a particular jurisdiction or market. In markets with high barriers to entry, scale may provide a competitive advantage. However, in many regional and local gaming markets, the competitive advantage gained by scale may not be as important because of already low competition. Revenue is an indicator of scale.
Business Profile: The business profile of a gaming company is considered because it greatly influences its ability to generate sustainable earnings and operating cash flows. Core aspects of a gaming company's business profile are the characteristics of the markets in which it operates, including the regulatory environment; its market position; and its geographic and revenue diversification.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position, which includes investing in gaming facilities, technology, and marketing and rewards programs to attract customers. The ability to sustain high profitability is generally a strong indicator of operating efficiency and substantial competitive advantages. The gaming industry generally has had very high profitability relative to other sectors. EBIT Margin is an indicator of profitability.
Leverage and Coverage: Leverage and cash flow coverage measures provide important indications of a gaming company's financial flexibility and long-term viability, as well as its ability to sustain its competitive position, invest in growth and meet debt service obligations. Indicators of leverage and coverage include ratios such as: Debt/EBITDA, EBIT/Interest Expense, and Retained Cash Flow/Net Debt.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant, because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations may include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
• Crown Resorts Limited
• Genting Berhad
• Genting Overseas Holdings Limited
• Genting Singapore Limited
• Melco Resorts Finance Limited
• NagaCorp Ltd.
• SJM Holdings Limited
• Studio City Finance Limited
The principal methodology used for these rated entities was Protein and Agriculture published in November 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Protein and Agriculture
Scale: Scale is an indicator of a company's revenue-generating capability and its resilience to shocks, such as sudden shifts in demand or rapid cost increases. Companies that are large in scale tend to have lower marginal costs, including those associated with manufacturing, sales force, distribution, and research and development. Larger companies also tend to have more bargaining power with purchasing organizations, customers, and suppliers. Revenue is an indicator of scale.
Business Profile: The business profile of a protein or agriculture company greatly influences its ability to generate sustainable earnings and operating cash flows. We assess geographic diversification, segment diversification, market share, product portfolio profile and earnings stability.
Leverage and Coverage: Leverage and cash flow coverage measures provide important indications of a protein or agriculture company's financial flexibility and long-term viability. Financial flexibility is critical to protein and agriculture companies because it indicates an ability to withstand commodity price volatility or product oversupply conditions. Relevant metrics for leverage and coverage include Debt/ EBITDA, Cash from Operations/ Debt, Debt/ Book Capitalization and EBITA/ Interest Expense.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant, because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost for investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends also affect ratings.
• Bright Food (Group) Co., Ltd.
• Hainan State Farms Investment Hldg Grp Co Ltd
• IOI Corporation Berhad
• Sawit Sumbermas Sarana Tbk (P.T.)
• Sime Darby Plantation Berhad
• Tunas Baru Lampung Tbk (P.T.)
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on www.moodys.com, for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
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