OREANDA-NEWS. Fitch Ratings expects Guangzhou R&F Properties Co. Ltd.'s (Guangzhou R&F) leverage to fall below 55% in 2016. The 2015 annual results show the company is deleveraging in line with Fitch's expectations, and will not have an impact on the Chinese property developer's 'BB'/Negative rating.

Guangzhou R&F's leverage, measured by net debt to adjusted inventory, was at 57.5% at the end of 2015, compared with a peak of 61.3% a year earlier. A catalyst for further deleveraging will be a successful A-share listing on the Chinese Shanghai Stock Exchange, for which an application was submitted in September 2015. Stable contracted sales and slower land acquisitions are also key drivers. Fitch estimates Guangzhou R&F's annual land premium will be around CNY8bn-10bn in 2016-2017.

Guangzhou R&F's contracted sales in 2015 were flat compared to 2014, at CNY54bn. Fitch expects the company's contracted sales to see only a marginal single-digit increase over the next one to two years as the company is more focused on maintaining an EBITDA margin of around 23%-25%.EBITDA margin dropped to 23.5% in 2015 from 28.3% in 2014, due to bookings of contracted sales from social housing, which have lower margins.

Fitch expects the ratio of contracted sales to total debt to be around 0.5x-0.6x in the next 18 to 24 months, little changed from its 2015 level. Churn weakened in 2015, where the ratio of total contracted sales to total debt had fallen to 0.58x by end-2015 from 0.65x a year earlier.