Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Country Garden Placement - Opportunistic Raise

China Jinmao Placement - Poor Track Record and A Possible Overhang on Share Price

Asia ex-Japan Credit - Analyst, Bondcritic

Brayan Lai

Asia ex-Japan Credit - Analyst

Credit

We initiate our coverage on <a href="https://www.smartkarma.com/entities/5225" target="_blank" data-smartkarma-citation="entities:5225:1">Country Garden Holdings Co (2007 HK)</a> (“Country Garden”) with a NEUTRAL recommendation on the entire COGARD complex as we think it is already fully valued for its credit. Within the COGARD complex, we are OVERWEIGHT COGARD 20 and 25 due to its higher spread pick-up against the rest of its curve.The company is a well-known Chinese mass-market property developer, with origins in Guangdong since 1997. It has a proven business model of large-scale developments generally located along core city fringes, suburban areas which results in its low land cost (10-20% of average selling prices – “ASP”) and faster standardized execution model. Over time the company has replicated and scaled its business nationally. The company has the distinction of the highest contract sales in FY17 in the Chinese property sector.In this note, we review the credit as well as examine its more recent motives to enter into the development and management of the nascent rental apartment markets in China. This is not the first time the company has aligned itself with the government in-line with its core company philosophy. On a concurrent basis, we also look into the company’s early involvement in the development of the domestic securitization and REIT market. China’s onshore securitization and REIT market development has been patchy over the last 10 years or so, owing to lack of a REIT code, infrastructure, legislation and tax regime, in our view. (Note that we will not be covering these topics in this report).

We initiate our coverage on Country Garden Holdings Co (2007 HK) (“Country Garden”) with a NEUTRAL recommendation on the entire COGARD complex as we think it is already fully valued for its credit. Within the COGARD complex, we are OVERWEIGHT COGARD 20 and 25 due to its higher spread pick-up against the rest of its curve.The company is a well-known Chinese mass-market property developer, with origins in Guangdong since 1997. It has a proven business model of large-scale developments generally located along core city fringes, suburban areas which results in its low land cost (10-20% of average selling prices – “ASP”) and faster standardized execution model. Over time the company has replicated and scaled its business nationally. The company has the distinction of the highest contract sales in FY17 in the Chinese property sector.In this note, we review the credit as well as examine its more recent motives to enter into the development and management of the nascent rental apartment markets in China. This is not the first time the company has aligned itself with the government in-line with its core company philosophy. On a concurrent basis, we also look into the company’s early involvement in the development of the domestic securitization and REIT market. China’s onshore securitization and REIT market development has been patchy over the last 10 years or so, owing to lack of a REIT code, infrastructure, legislation and tax regime, in our view. (Note that we will not be covering these topics in this report).

Country Garden: Benchmark Chinese HY Property Credit, New Build-To-Rent Business