Daily Brief China: Jinke Smart Services, West China Cement, Agile Property Holdings, China SCE and more

• For the month of September, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
• The average premium for the new deals announced (or first discussed) in September was ~40%, and a year-to-date average of 39%.
• This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

and more…

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Evergrande
5. Central China Real Estate

and more…

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

We view China SCE as “High Risk” on the LARA scale. Our assessment reflects the risks stemming from the company’s fluctuating performance and high financial leverage. SCE specialises in mid-range and high-end residential properties. It has an established presence in Quanzhou and Xiamen, which are both economically vibrant markets with high growth potential. The company has also been diversifying outside Fujian, with the Yangtze River Delta region now its largest contributor in terms of contracted sales.

The bulk of the land bank is located in Tier 1 and 2 cities, which will likely see a rebound when the industry recovers. We like SCE’s diversification and geographical coverage, but remain concerned about execution risks amid the competitive operating environment. Separately, the company’s use of co-operative projects (significant use of JVs and material minority interest) points to off-balance-sheet debt, which would in turn suggest poor corporate governance.

Our fundamental Credit Bias on SCE is “Negative” on account of the weak contracted sales, declining liquidity and weakened credit metrics amid the industry downturn. The company also faces heightened refinancing risk for its upcoming debt, while access to onshore funding remains uncertain. Moreover, the company’s increased dependency on secured borrowings to raise funds will reduce its financial flexibility. That said, SCE intends to dispose of assets to raise cash, which could temporarily alleviate the liquidity pressure. Its land bank includes land in upper-tier cities, where economic fundamentals might be stronger and sales should rebound once the operating conditions improve.

Controversies are “Immaterial” despite reputational risk on account of the increasing number of property-quality related disputes with customers. The ESG Impact on Credit is “Neutral”. We note positively the company’s willingness to honour debt obligations.