Moody's affirmed Country Garden Holdings Co. Ltd.'s Ba1 corporate family rating and Ba2 senior unsecured rating and revised the ratings outlook on the Chinese real estate developer to positive from stable.
Moody's said on Aug. 30 that the outlook revision reflects its view that Country Garden's credit metrics will improve over the next 12 to 18 months to levels that are strong for its current rating. The company is expected to maintain strong execution capability and prudent financial management through the challenging property market conditions in China, according to Josephine Ho, a senior vice president at Moody's.
The rating agency expects Country Garden's leverage, as measured by revenue/adjusted debt, to will improve to between 105% and 110% over the next 12 to 18 months from 97% in 2018 in light of revenue growth from contracted sales in 2017 and 2018. The developer's stable profit margins are estimated to keep its interest coverage, as measured by EBIT/interest, above 5.0x in the next 12-18 month, compared to 4.9x as at 2018-end.
Moody's expects Country Garden to deliver contracted sales growth of 5% over the given period and expects the company to maintain good liquidity through proactive liquidity management.
