Fitch Ratings affirmed Modern Land (China) Co. Ltd.'s long-term foreign- and local-currency issuer default ratings at B, with a stable outlook.
The ratings reflect the company's weaker margin and higher leverage offset by a stronger business profile. The B ratings are supported by improving land-bank quality following the company's move to reposition business toward tier 1 and 2 cities.
Fitch expects Modern Land to remain under pressure to acquire land in 2020 to sustain sales growth.
Furthermore, the contracted sales' high share from joint ventures shows that the company's financial statements do not adequately reflect its financial profile.
The company's land premium remained stable at about 45% in the first half of 2019 and its cash collection improved to 90% in the same period, compared with 72% in 2018.
Fitch believes that Modern Land will record 22 billion Chinese yuan in contracted sales in 2019 and 27 billion yuan in 2020. Its gross profit margin from property development is expected to be maintained at about 25% until 2022.
As of Jan. 9, US$1 was equivalent to 6.93 Chinese yuan.