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Moody's lifts Sino-Ocean's Baa3 ratings outlook

Moody's amended its outlook on Sino-Ocean Group Holding Ltd.'s Baa3 issuer ratings to stable from negative.

The outlook is based on an expectation that Sino-Ocean will sustain its improved credit metrics over the next 12 to 18 months and that the company will be supported by China Life Insurance Co. Ltd., its largest shareholder, "in times of need," said Franco Leung, a Moody's vice president and senior credit officer.

The rating agency expects Sino-Ocean to increase its contracted sales in 2017 to between 56 billion Chinese yuan and 59 billion yuan, from 50 billion yuan in 2016, thanks to the company's strong land bank in first- and second-tier cities, as well as its salable resources worth over 100 billion yuan as at end-2016.

Sino-Ocean is expected to improve its gross profit margin to around 22% to 24% in 2017 from 22% in 2016 at the hands of more profitable projects presold in the last six to 12 months.

Moody's also highlighted improvement in the company's debt management, noting a 16% reduction in reported debt to 43.8 billion yuan in 2016. Moody's believes Sino-Ocean's revenue growth will outpace that of its debt in the covered period, with debt leverage projected to improve to roughly 80% from around 73.7% at end-2016 and 49.5% at end-2015.

As of April 7, US$1 was equivalent to 6.90 Chinese yuan.