International Rating Agencies Think Highly of Helenbergh: Profound Land Reservation, Reasonable Lever, and Improvement of Turnover Rate

Being supported by multiple positive factors, including strong sales growth, diversified land reservation, low levels of leverage and improved turnover, Helenbergh China Holdings Limited (Helenbergh for short) won a “B⁺”in issuer default ratings of long-term foreign currency from Fitch Ratings, the international authoritative credit rating agency, with stable prospect.

According to Fitch Ratings, Helenbergh’s land reservation is widely distributed in five regions, including the Pearl River Delta Region, the Yangtze River Delta Region, the Jing-Jin-Ji Region, the Western China Region, and the Central China Economic Region. At the end of 2020, the equity land reservation has reached 31.6 million square meters,  among which the land reservation of Greater Bay Area accounted for about 32%. Diversified land reservation has become an important factor to confirm the current rating.

In the past three years, Helenbergh’s land purchasing cost has been maintained at a relatively reasonable level, which was in a lower level in the industry, leaving space for profit.

According to the estimation of Fitch Ratings, Helenbergh’s average cost of overall land reservation is about 1/4 of its average selling price of residential buildings, which made its profit margin of EBITDA (earnings before interest, tax, depreciation, and amortization) remain at about 20%.

Helenbergh adhered to the strategy of national layout and deep regional developing. In the first half of 2021, the company has obtained dozens of quality lands in many cities including Nanjing, Chengdu, Suzhou, Chongqing, Zhongshan, Foshan, Jinhua, and Guiyang.

CRIC statistics show that, in the first half of this year, Helenbergh’s newly acquired land reserve value has reached 38.63 billion, ranking the 34th of the list of China’s top real estate enterprises in new value.

Currently, Helenbergh’s land reservation can support its development need in the future four years. In this way, only 35%-40% of the contract sales payment needs to be used to supplement land reservation, so as to keep steady growth of contract sales. It is hopeful that the leverage ratio could be further decreased.

At the end of 2020, the leverage ratio (based on the ratio of net debt and adjusted inventory) of Helenbergh was about 40%, a continuous decline from the previous year. Comparing with other enterprises with the evaluation of “B⁺”, Helenbergh’s leverage ratio is lower.

The robust sales growth and steady cash collection also push Helenbergh’s leverage ratio for a reduction. According to Fitch Ratings, in 2021, Helenbergh’s sales rate of return will be improved.

According to CRIC statistics, Helenbergh’s contract sales amount in full caliber reached 78.4 billion yuan in 2020, with a year-on-year growth of more than 47%. In the recent five years, Helenbergh’s compound annual growth rate of contract sales amount in full caliber has exceeded 40%.

According to the lists compiled by third parties such as China Index Academy, in the first half of this year, Helenbergh’s contract sales of equity caliber has reached 43.5 billion yuan, ranking 33rd in the Top 50 of China’s real estate enterprises.

The continuous improvement of operation efficiency, especially the enhancement of sales turnover rate, helped in Helenbergh’s sales growth and in maintaining low leverage ratio.

In 2020, Helenbergh’s sales turnover (based on the ratio of contract sales to total debt) increased from 1.2 times of the previous year to 1.4 times. According to Fitch Ratings, since the company’s land reservation and marketable resources are sufficient, its sales turnover will be maintained at about 1.4 times.

Regulators further tightened on the financing side, so as to control the leverage level of land agent. Helenbergh maintained a stable and reasonable leverage level, and also expanded the financing channels and reduced the cost of capital.

In the first half of 2021, Helenbergh increased the credit financing in the forms of foreign dollar debt and domestic private debt, with a decrease in financing such as trust and estate management. The overall financing cost was kept below 10%.

Helenbergh successively issued and re-issued two batches of overseas senior unsecured bonds in the first half of this year, with the total principal of 350 million dollars. The company obtained the ratings of “B2” and “B⁺”from Fitch Ratings and Moody’s Credit Rating, with the prospect of “stable”. Moody’s offered an “B3”in debt and additional issuance, which fully showed that international rating agencies thought highly of Helenbergh.