Fitch publishes China Vanke
Global rating agency Fitch has published China Vanke Co Ltd's (Vanke) Long Term Issuer Default Rating (IDR) of 'BBB+' with Stable Outlook and senior unsecured debt rating of ' BBB+'.
Global rating agency Fitch has also assigned Vanke's proposed offshore USD unsubordinated unsecured notes an expected ' BBB+(EXP)' rating. The notes, to be issued by Bestgain Real Estate Limited (Bestgain), are to be jointly and severally guaranteed by Vanke Real Estate (Hong Kong) Company Ltd (Vanke HK), a wholly owned subsidiary of China Vanke. The final rating on the notes is contingent upon the receipt of final documents conforming to information already received.
Vanke's ratings reflect its focus on providing mass market housing to first-time and upgrading buyers, and its significant scale and national presence, which provide operational and cash flow flexibility. The ratings are also supported by the company's low leverage, strong contracted sales/debt coverage and funding diversity which is underpinned by its flexible funding strategy and strong relationships domestic banks.
Vanke's focus on mass market allows it to benefit from strong demand for housing stemming from China's continuous urbanisation. This is in line with numerous government policies that have been introduced to ensure sufficient supply of mass market housing. In 2011, 88% of their contracted sales were of units measuring below 144 square metres each. The company also achieved a cumulative average growth rate of 38.4% in contracted sales from 2009 to 2011 despite strict home purchase restrictions imposed in firsttier cities and certain major second-tier cities.
Vanke is the largest among Fitch-rated Chinese homebuilders by revenue and contracted sales.
In December 2012, Vanke recorded revenue of RMB96.9bn from contracted sales of RMB141bn on 320 projects spanning 60 cities, underlining the company's national presence. Majority of total sales were in second-tier and third-tier cities and evenly distributed in four geographical areas - Shenzhen/ Guangzhou, Beijing, Shanghai and Chengdu.
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