RAM retains a cautious stance on Country Garden's risk appetite

KUALA LUMPUR (June 28): RAM Rating Services Bhd said today that it remains cautious of China-based Country Garden Holdings Co Ltd’s aggressive risk appetite, particularly in terms of land acquisition and total debt.

"We will closely monitor Country Garden’s financial metrics, as the rating may come under pressure if its land banking exceeds expectations, while sales collection decelerates substantially," the local rating agency said in a statement today.

RAM has reaffirmed its AA3(s) rating for Country Garden Real Estate Sdn Bhd's (CGRE) RM1.5 billion Islamic medium term notes (IMTN) programme with a stable outlook.

It said the rating reflects its view that CGRE’s ultimate parent Country Garden will maintain its strong property sales performance and solid cashflow generation, despite China’s challenging operating environment.

Nevertheless, RAM expects Country Garden’s credit profile to remain constrained by an increasingly heavy debt load, given its aggressive land banking in line with expansion in its sales performance and business scale.

"The rating of CGRE's IMTN reflects unconditional and irrevocable corporate guarantees extended by Country Garden, Bright Start Group Ltd and Top Favour Holdings Ltd on a joint and several basis. Therefore, the rating mirrors that of Country Garden (as the strongest obligor) and its credit fundamentals," the statement added.

Having jumped 78% to RMB551 billion in 2017, Country Garden’s sales grew a further 25% to RMB188 billion in the first three months of 2018. As at end-December 2017, the group has projects in 220 Chinese cities, from 185 as at end-December 2016, as its property portfolio in China doubled to 1,456 projects.

Country Garden’s land acquisitions leaped 152% to RMB319 billion in fiscal 2017. As a result, its total debt increased to RMB215 billion as at end-December 2017, compared with RMB136 billion as at end-December 2016. — theedgemarkets.com

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