Fitch Rating has upgraded the Long-Term Foreign-Currency Issuer Default Ratings (IDR) of Hong Yang Group Company Limited and subsidiary Redsun Properties Group Limited, a leading integrated property developer in China, (“Redsun Properties” or “Group”; stock code: 1996) to “B+” from “B” with stable outlook. Fitch has also upgraded the senior unsecured ratings of both companies to “B+” from “B”.
Fitch mentions that the upgrade reflects the group’s expanded contracted-sales scale, supported by its high-quality land bank and prudent financial policy, which has kept its leverage below 50%, a healthy level among “B” category peers. The group also has a higher recurring income arising from the larger scale of its property-rental business.
Fitch expects the group’s land acquisitions and geographical expansion to drive higher sales, and forecasts annual attributable contracted sales will increase 25% to CNY30 billion in 2019, which will be supported by sufficient saleable resources as the group acquired more land during 1H19. Currently, the group had total land bank of 15.7 million sqm at end-June 2019, and the group diversified its land bank to mid to large cities, including Wenzhou Xi’an, Changsha Jiangmen.
Fitch expects the group’s EBITDA margins (after adding back capitalised interest in cost of goods sold) remain healthy at 20%-23% in 2019-2020 as its high-margin projects will provide support over the next 12 months.
The group’s investment-property portfolio, which comprises mainly malls for retail and the wholesale of household construction and decoration materials, enjoys a niche market position and nearly full occupancy. The portfolio provides a recurring EBITDA/interest coverage ratio of 0.3x, higher than for ‘B’ related peers. Fitch expects the opening of Nanjing Hong Yang Plaza retail mall (Block C) and still-resilient demand from consumers for furniture and decorations to continue supporting the group’s rental revenue growth and its ratings.
About Redsun Properties Group Limited (“Redsun Properties”) (stock code: 1996)
Redsun Properties Group Limited (“Redsun Properties” or “The Group”) is a leading comprehensive developer in China, focusing on development of residential properties and the development, operation and management of commercial and comprehensive properties. The Group has established a steady regional leading position in Jiangsu Province by taking root in Nanjing, Jiangsu and Yangtze River Delta. Since the incorporation of Nanjing Redsun in 1999, Redsun Properties has worked in the sector of property development and sales for 20 years, established the Hong Yang brand and received widespread recognition for the development capacity and industry position.
While developing residential properties, Redsun Properties also operates commercial complexes covering shopping malls, amusement parks and community centers, hotels and office buildings. Most of the commercial property buildings are adjacent to the Group’s residential property projects, providing ancillary services for the residents and also increasing the value of the Group’s residential property projects.
