Rating agencies rain on Yanlord’s tycoon sunshine

Business Times: Thu, Nov 17
(SINGAPORE) It was the sort of day that no one linked with Yanlord Land Group Ltd will forget in a hurry. What might have begun as an occasion to clink champagne glasses ended with a flat taste in the mouth. Yanlord got an early boost from three se…

(SINGAPORE) It was the sort of day that no one linked with Yanlord Land Group Ltd will forget in a hurry. What might have begun as an occasion to clink champagne glasses ended with a flat taste in the mouth.

Yanlord got an early boost from three separate tycoons – billionaire Peter Lim, UOB Kay Hian chairman Wee Ee Chao and Wilmar International chairman Kuok Khoon Hong – when it emerged that they recently raised their deemed stakes in the company and were now substantial shareholders.But two ratings agencies yesterday downgraded Yanlord after the market closed, threatening to wipe out yesterday’s share price gains and the feel-good factor that had flowed earlier in the day.

Citing weak sales, aggressive expansion and undertain market conditions, Standard & Poor’s cut the China-based luxury real estate developer’s regional rating to cnBB+ from cnBBB- with a negative outlook, but maintained the company’s long-term rating at BB.

Moody’s Investors Service on its part slashed Yanlord’s senior unsecured bond rating to Ba3 from Ba2 with a negative outlook.

Yanlord’s balance sheet will be under stress after the company pays 3.5 billion yuan for two projects in Shanghai and Zhuhai, Moody’s said.

‘Moody’s expects Yanlord to increase its onshore borrowings to fund these acquisitions and pay for the S$375 million convertible bonds which could be put in 2012,’ Moody’s senior analyst Ken Chan said in a statement.

Wang Anyi, Yanlord head of corporate finance and relations, said the three men had not communicated with the company beyond disclosing their stakes.

She said Yanlord was still trying to determine how much stock the trio was actually holding, as individuals and as a group, because the recent purchases seemed to have been done through investment vehicles that may have been jointly controlled.

The rating cuts cast a shadow over earlier exuberance about the stock, which shot up by 12.7 per cent yesterday, or 13.5 cents, to close at $1.195 on overnight news about the tycoons’ deemed stakes.

‘It closed at $1.06 (on Tuesday), opened (yesterday) at $1.14 and rallied all the way to $1.21, and everybody was wondering what was going on,’ said Manoj Chamanlal, a dealer at CIMB Securities.

Carol Wu, an analyst at DBS Vickers Securities in Hong Kong, said she would maintain her ‘hold’ recommendation on the stock, with a 12-month price target of $0.93.

She expected the stock to correct today in light of the credit downgrades.

She reckoned that the credit action was not a surprise, because major land acquisitions are seldom welcomed by bond investors.

Still, after the stock’s sharp rally yesterday, ‘If I’m a fund manager, I would not buy at this moment,’ she added.
Source: Business Times © Singapore Press Holdings Ltd

About Propertyguru Expert

Website contend is hand picked and high demand. Marketing Manager at Huttons Asia Pte Ltd. Indonesian Focusing in Private Residential Singapore. *Service Quality Assured. *Top 300 producer in 2011.