Fitch: China Overseas Land's 2015 Results Unaffected by Weak Market
OREANDA-NEWS. China Overseas Land & Investment Limited's (COLI, A-/Stable) is in a strong position to benefit from increased demand in property upgrades due to a strong brand and its presence in China's high-growth economic zones around the Pearl River Delta, Yangtze River Delta, Bohai Rim and the northern and western regions, says Fitch Ratings.
This follows the release of the company's 2015 annual results, which were in line with Fitch's expectations and support the Chinese property developer's ratings.
Fitch says COLI's EBITDA margin is likely to remain strong at around 25%-27%, compared with 27.5% in 2015, despite challenging market conditions where industry margins fell to between 20%-25% from 30% in previous years.
Fitch expects the ratio of contracted sales-to-total debt to remain around 1.2x-1.3x in the next 18-24 months, and leverage to revert to its previous level of around 15%-20% in 2017, from 5.3% in 2015. In addition, COLI has one of the lowest borrowing costs among Chinese homebuilders, with a weighted-average borrowing cost of 4.23% as of end-2015 compared with 4.45% in 2014. Its low funding costs result from access to offshore bond and loan markets, and its state-owned enterprise status - which improves access to domestic funding.
COLI reported solid performance in 2015, with strong contracted sales growth of 28% to HKD180.6bn, meeting its target. Contracted sales by gross floor area rose 28% to 12.6 million sq m, while the average selling price for contracted sales decreased 4% to HKD14,333 per sq m. The company had a steady profit margin of 28%.
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