Core viewpoints
Corporate rating: on April 9, 2019, Moody's Corporation rated the company's main body B1; Standard & Poor's rated the company's main body B + on August 9, 2019; Fitch rated the company's main body BB- on August 18, 2019; the long-term outlook of the three rating agencies and the company's main body is stable.
The proportion of overseas bonds issued is relatively high, the coupon rate is stable, and the risk premium is slightly higher. In terms of US dollar debt, Moody's Corporation gave the priority note with 8.75% coupon a B2 rating, while Fitch gave the remaining seven priority notes a BB- rating. In terms of RMB bonds, Chinatrust gives AAA ratings to seven corporate bonds issued since 2018. The weighted average coupon of Rongxin China dollar bonds is 9.21%, which is lower than the average coupon of US dollar bonds issued by companies with the same main rating in the industry after January 1, 2018.
With the steady growth of contract sales and the distribution of land reserves in the central cities of major urban agglomerations across the country, the cost of land is low and the profit space can be expected. In 2019, the company's sales volume and sales area increased steadily, to 141.32 billion yuan and 6.548 million yen respectively, the year-on-year growth rate dropped to about 16%, which is still a good level on the basis of a high base in 2018; the average sales price reached 21583 yuan / yuan, basically maintaining the level of the same period in 2018. By the end of 2019, the company's total land reserve is about 27 million yuan, and the equity land reserve is 13.318 million yuan, which is mainly concentrated in the second-and third-tier cities of the Yangtze River Delta, Hercynian and Central Plains urban agglomeration, with an average land cost of 6897 yuan per million.
The revenue increases, the profit level rises, the financial risk decreases slightly steadily. The proportion of minority shareholders' rights and interests in owners' rights and interests decreased by 3.9 percentage points compared with the same period last year, and the company has a positive attitude towards foreign cooperation. The ratio of three fees to revenue has been improved, and the management level is relatively stable. The equity multiplier remained stable and the turnover rate increased.
The debt structure is reasonable and the margin of debt repayment safety is high. The trend of the company's cash flow remains unchanged in 2019, and related party payments have little impact on the company's funds. If only short-term debt is repaid after deducting all kinds of expenses in 2020, the coverage ratio of contract sales from July to December 2019 to sales demand for the same period this year is 2.7 times; if land expenditure is further considered, the remaining amount after repaying the short-term debt will still be able to support its land acquisition scale similar to that in 2019. Generally speaking, the financial pressure of the company is not high. Debt service indicators have improved, financing costs have fallen steadily, and the risk of debt may be smaller. The asset mortgage rate fell by 24 percentage points to 59.5 per cent, the size of assets as collateral fell by 14.1 percentage points, and the proportion of inventory and investment properties used as collateral fell 1.3 and 8.3 percentage points respectively to 29.6 per cent and 38.8 per cent.
To sum up, we think that the credit safety margin of the company is high.
Risk tips: policy risk, financing risk, credit risk, unfinished sales risk