Fitch Ratings has affirmed
The Outlook is Stable. Fitch has also affirmed the Chinese homebuilder's foreign-currency senior unsecured debt ratings at 'BBB+'.
CRL's ratings are supported by the company's stable financial profile, with low leverage and strong financial flexibility demonstrated by its sufficient liquidity and continuous funding access under challenging market conditions. The ratings are also supported by CRL's sustained strong market position in Tier 1 and 2 cities and a high quality, expanding investment-property (IP) portfolio with healthy recurring interest coverage.
Key Rating Drivers
Healthy Financial Profile: We expect a slight rise in leverage - measured by net debt/net property assets - to 25%-30% in 2022, driven by weaker contracted sales proceeds and continuous capex requirements for the IP business. CRL's leverage was maintained at 24%-25% in 2019-2021, well below the 35% level at which we would consider negative rating action.
Strong Funding Access: CRL also has sufficient liquidity with an unrestricted cash-to-short-term debt ratio of 1.7x at-end 2021. CRL had committed undrawn bank facilities of
Stabilising Development-Property (DP) Operations: CRL's 7M22 total contracted sales fell 20.6% yoy to
Slower Rental Income Growth: We expect CRL's rental income from IPs to be flattish in 2022 due to rental relief as a result of the pandemic. CRL's income from IPs, excluding hotels, rose by 36% yoy in 2021, driven by a 38% increase in same-store rental income for its shopping mall business and continued strong occupancy rates. Rental income from IPs and hotels fully covered the company's interest expense and dividends for the first time in 2021.
CRL is one of
Significant IP Expansion Plans: CRL plans to increase the number of shopping malls it operates to 98 by 2025. This will further solidify its market leadership, but will require significant investment in the next few years. Fitch expects the capex for IP to remain high at around
No Uplift from Parent: CRL's rating is based on its Standalone Credit Profile (SCP) and does not incorporate any uplift from its parent,
Derivation Summary
CRL's scale of
CRL has a smaller contracted sales scale than COLI, but a much stronger IP portfolio that generates stable recurring income. This provides CRL with better protection from business cycles and contributes to stronger debt-servicing ability than COLI. Both COLI and CRL have low leverage with net debt/net property assets of around 24% at end-2021.
The asset quality of CRL's IP business, with assets of more than
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Total contracted sales of
EBITDA margin of around 20% in 2022-2024 (2021: 22%)
IP revenue growth of -1% in 2022, 11% in 2023 and 13% in 2024
IP capex of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Sustained neutral-to-positive FCF on a consolidated basis
Net debt/net property assets sustained below 30%
IP assets/net property assets sustained above 45% (2021: 48%)
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Net debt/net property assets above 35% for a sustained period (2021: 24%)
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Ample Liquidity: CRL's reported cash of
Issuer Profile
CRL is one of
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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