[ET Net News Agency, 6 November 2019] Moody's Investors Service has revised to stable
from positive the rating outlook of Landsea Green Group Co., Ltd. (00106). At the same
time, Moody's has affirmed Landsea's B2 corporate family rating (CFR) and B3 senior
unsecured debt rating.
"The change in outlook to stable reflects that our expectation that Landsea's credit
metrics will weaken over the next 12-18 months, driven by slower revenue recognition from
a decline in contracted sales in the first nine months of 2019," said Cedric Lai, a
Moody's Vice President and Senior Analyst.
Specifically, Moody's expects the company's debt leverage -- as measured by adjusted
debt/EBITDA -- will deteriorate to 5.5x-6.0x from 4.5x level in the 12 months to June
2019, while its interest coverage -- as measured by EBIT/interest -- will weaken to
2.5x-3.0x from 3.4x over the same period.
Landsea's B2 CFR reflects its asset-light business model, allowing it to earn service
income while requiring limited capital and borrowed funds when compared to fully-owned
property development projects.
Moody's expects Landsea's service income will grow to around RMB1.1-RMB1.3 billion over
the next 12-18 months, equivalent to about 1.1x-1.2x of its interest expenses over the
same period. (KL)