[ET Net News Agency, 10 October 2019] Moody's Investors Service said in a new report
that most rated Chinese property developers should see credit metrics improve over the
next 12-18 months, as revenue is set to outpace debt growth.
"We expect strong contracted sales growth over the past 2-3 years to drive revenue
growth in 2019 and 2020, while lower sales growth targets will reduce the need for
debt-funded land purchases," said Celine Yang, a Moody's Assistant Vice President and
Analyst.
Meanwhile, price caps and rising land costs will weaken profit margins, with the
weighted average gross profit margin for the 53 developers covered in the report to
contract to around 29%-30% in 2019 and 2020 from 31.4% for the 12 months ended June 2019.
Liquidity remains adequate for most rated developers despite tighter financing controls,
although refinancing risk will likely increase for weaker developers with material levels
of short-term debt and high exposure to trust loans.
Credit metrics for the 53 rated developers covered in Moody's report -- of the 68 it
rates -- weakened slightly over the 12 months ended June 2019 because of developers' plans
to deliver a larger part of their projects in 2H 2019 but should improve over the next
12-18 months. (KL)