Country Garden RM1.5 billion sukuk rated AA3 by Ram Ratings

PETALING JAYA: RAM Ratings has assigned a preliminary rating of AA3(s)/Stable to Country Garden Real Estate Sdn Bhd’s proposed Islamic Medium-Term Notes (IMTN) Programme of RM1.5 billion.
“The issue rating reflects unconditional and irrevocable corporate guarantees extended by Country Garden Holdings Company Limited (Country Garden or the Group), Bright Start Group Limited and Top Favour Holdings Limited, on a joint and several basis.
Based on the strongest-link approach, the issue rating reflects the credit linkage to Country Garden (as the strongest obligor) and the credit fundamentals of the group,” RAM said in a statement yesterday.
It said that Country Garden’s credit strength is underpinned by its entrenched market position as one of the top 10 players in the vast Chinese property market. Last year, the group was the sixth largest player by contracted sales and second by property space delivered.
“The rating also considers Country Garden’s fairly diversified geographic footprint in China. Over the past five years, Country Garden has transitioned from a regional player based in Guangdong, to a national property developer. As at end-June 2015, Country Garden had operations in 26 provinces, municipalities and autonomous regions in China,” it added.
The group’s sales mix is now less concentrated following expansion efforts outside Guangdong with sales generated in Guangdong making up just one-third of its contracted sales last year, compared with 67% of sales in 2009.
Country Garden also faces minimal project-concentration risk as its largest project accounted for only about 4% of contracted sales in FY Dec 2014.
“Through strong pre-sales proceeds, Country Garden has been able to generate robust operating cash flows. The Group’s operating cashflow debt coverage has ranged between 0.28 times and 0.46 times over the past five years – a level superior to that of similarly-rated peers. Chinese developers benefit from the country’s pre-sales system, where buyers typically pay in full at the point of sale, which could be one to two years before the property is completed.