Moody's revises Jiayuan's outlook to positive

The agency also affirmed its B2 corporate family rating.

Moody’s Investors Service has changed the ratings outlook of property developer Jiayuan International Group Limited, to positive from stable.

"The positive ratings outlook reflects our expectation that Jiayuan will grow its operating scale without sacrificing profitability, maintain strong credit metrics and improve its capital structure over the next 12-18 months," Kelly Chen, a Moody's Assistant Vice President and analyst, said.

Moody’s said the company will likely generate stable and healthy margins due to its low-cost land bank.

Its gross profit margin was high at 32.3% in 2020, against 32.6% and 31.6% in 2019 and 2018, respectively. Meanwhile, the company’s exposure to non-bank channel significantly declined in 2020.

The outlook, however, may revert to stable if the company records weaker growth in contracted sales or revenue than expected, if its liquidity weakens, and it its funding channel narrows amongst other factors.

The ratings agency also affirmed the Jiayuan’s B2 corporate family rating and B3 senior unsecured debt rating.

"At the same time, the rating affirmation reflects our expectation that the company will maintain its financial discipline and adequate liquidity position over the next 12-18 months," Chen also said.

This rating, according to the agency, reflects Jiayuan’s track record in its core markets in the Yangtze River Delta, and its low-cost and quality land bank.

Moody’s said Jiayuan’s ratings could upgrade provided it shows a sustainable growth in its contracted sales and revenue without forgoing profitability, further diversifies its funding channels and maintain low risks of a change in control.