Hong Kong, February 25, 2022 -- Moody's Investors Service has assigned a Baa3 backed senior unsecured
rating to the USD notes to be issued by Franshion Brilliant Limited,
a wholly-owned subsidiary of China Jinmao Holdings Group Limited
(Baa3 stable). The notes are unconditionally and irrevocably guaranteed
by the parent company.
China Jinmao will use the proceeds from the proposed issuance to refinance
existing medium to long-term offshore indebtedness due within one
year.
RATINGS RATIONALE
"China Jinmao's Baa3 issuer rating reflects the company's
solid track record of developing landmark-integrated projects and
the stable rental income generated by its quality portfolio of investment
properties," says Cedric Lai, a Moody's Vice President and
Senior Analyst.
The rating also considers China Jinmao's strong liquidity as well
as diversified and solid access to onshore and offshore funding,
which is, in turn, supported by the company's status as a
subsidiary ultimately owned by SinoChem Holdings Ltd, a state-owned
enterprise under the central government.
However, China Jinmao's issuer rating is constrained by the company's
(1) increased execution risk and moderate financial metrics because of
the rapid expansion of its property development business; and (2)
volatile performance from its primary land development business.
The proposed issuance will improve China Jinmao's liquidity but not materially
affect its credit metrics, because the company will use the proceeds
to refinance its debt.
Moody's expects China Jinmao's leverage, as measured by adjusted
debt/capitalization, will gradually improve to around 52%
over the next 12-18 months from 55% as of 30 June 2021.
Moody's also forecasts the company's EBIT/interest coverage
will improve to around 3.2x-3.5x over the same period
from 2.4x for the 12 months ended 30 June 2021, driven by
higher revenue recognition and controlled debt growth. Such financial
profile remain appropriate for its Baa3 rating.
China Jinmao's contracted sales slightly grew 2% in 2021 to RMB235.6
billion from RMB231.1 billion in 2020. Moody's forecasts
that the company's contracted sales will decline slightly over the next
6-12 months, driven by weak homebuyer confidence.
China Jinmao's liquidity is excellent. Moody's expects the company's
cash holdings, along with its operating cash flow, will cover
its short-term debt and committed land payments over the next 12-18
months. The company's unrestricted cash-to-short-term-debt
ratio was at 1.3x as of the end of June 2021.
China Jinmao's issuer rating is not affected by subordination to
claims at the operating company level. This is because, despite
its status as a holding company with most of the claims at the operating
subsidiaries, China Jinmao's creditors benefit from the group's
diversified business profile, with cash flow generation from its
property development, investment properties and hotel rental segments,
which mitigates the structural subordination risk.
In terms of environmental, social and governance (ESG) factors,
Moody's has considered the company's (1) strong shareholders and representation
on its board of directors; (2) disclosure of material related-party
transactions as required by the Corporate Governance Code for companies
listed on the Hong Kong Stock Exchange; and (3) diversified board
of directors and four special committees to supervise the company's operations.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The stable rating outlook reflects Moody's expectation that China Jinmao's
credit metrics will support its rating over the next 12-18 months
and that the company will maintain good liquidity to fund its expansion.
Moody's could upgrade China Jinmao's ratings if the company (1) executes
its sales plan and achieves stable revenue growth; (2) improves its
geographic diversity and business scale; and (3) strengthens its
financial ratios, with its adjusted debt/capitalization below 45%
and EBIT/interest above 5.0x on a sustained basis.
Downgrade rating pressure could arise if China Jinmao (1) fails to implement
its business plan or (2) pursues further debt-funded land acquisitions,
such that its adjusted debt/capitalization stays above 53%-55%,
its EBIT/interest falls below 3.0x-3.3x, or
its unrestricted cash/short-term debt remains below 100%
on a sustained basis.
Material weakening in the company's contracted sales and operating cash
flow due to a significant and prolonged downturn in the property market
will also pressure the rating.
The principal methodology used in this rating 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.
China Jinmao Holdings Group Limited develops residential and commercial
properties in first-tier and major second-tier cities in
China. As of 30 June 2021, the company had a total property
development land bank of approximately 63.8 million square meters
in gross floor area.
The company listed on the Hong Kong Stock Exchange in 2007. As
of 30 June 2021, China Jinmao was 35.3% owned by Sinochem
Hong Kong (Group) Company Limited (Sinochem HK, A3 stable),
which was in turn 100% owned by Sinochem Holdings.
On 16 September 2021, Sinochem Group and China National Chemical
Corporation Limited (ChemChina, Baa2 stable) completed a share transfer
to Sinochem Holdings, which is fully owned by the State-owned
Assets Supervision and Administration Commission (SASAC) of the State
Council of China. Consequently, Sinochem HK has become ultimately
100% owned by and managed as an integral part of Sinochem Holdings.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
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The first name below is the lead rating analyst for this Credit Rating
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Cedric Lai
Vice President - Senior 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
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
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China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
