OREANDA-NEWS. Fitch Ratings expects China-based Logan Property Holdings Company Limited's (Logan; BB-/Stable) leverage to stay below 40% in 2016, with a disciplined financial policy and improving Greater Shenzhen property market. This is despite increased land acquisition costs.

The residential property developer's land acquisition costs increased almost 95% to CNY6988/sqm in 2015 from around CNY3587/sqm in 2014. The increase is due to two land parcels acquired in Shenzhen and Zhuhai, with an average price above CNY10,000/sqm.

Logan's attributable land premium incurred increased 89% to CNY11.1bn in 2015 as it bought the high-priced Shenzhen land through joint-investments. Logan benefited from an exceptionally strong performance in the Greater Shenzhen Region in 2015. The company achieved more than CNY20.5bn in contracted sales, above its revised sales target of CNY18bn. Greater Shenzhen accounted for 43% of contracted sales in 2015 and will continue to be Logan's biggest sales contributor in 2016. The lower leverage is also helped by a strong 92% cash collection rate in 2015. Consequently, Logan further reduced 2015's leverage to 27% from 37% net debt/adjusted inventory in 2014.

Logan's liquidity remains healthy at year end 2015, with lower net debt levels. Total debt edged up 4% to CNY20bn, while total cash balance increased 26% to CNY11.5bn. The readily available cash is sufficient to cover Logan's short term debt obligations of CNY 4.3bn in 2016.

Logan's 2015's results are in line with Fitch's expectations and support the company's rating.