The Issuer Rating reflects LVGEM (China) Real Estate Investment Company Limited (“LVGEM” or “the company”)’s established track record of above-average profit margin, specialized management expertise in the urban renewal business, and its focus on the Greater Bay Area (GBA) region, including the Baishizhou project which so far marks the record-large redevelopment project in Shenzhen. However, LVGEM’s rating is constrained by its modest business franchise in terms of contracted sales scale, acceptable liquidity profile with the basic source of funding, and significant concentration risks given its revenue drivers relying on a limited number of projects under development.
The Stable Outlook reflects our expectation that LVGEM would expand its operating scale in a prudent manner following its stake increase in the Baishizhou redevelopment project. It also reflects our expectation that LVGEM will maintain its competitive edge and niche strategy in the urban renewal business while managing an adequate financial profile without a material increase in financial leverage in the near term.