Fitch: Healthy Financial Metrics Support China's Golden Eagle

Tue Mar 18, 2014 10:58pm EDT

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(The following statement was released by the rating agency) HONG KONG, March 18 (Fitch) China-based Golden Eagle Retail Group Limited's (Golden Eagle, BBB-/Stable) rating continued to be supported by its strong financial position and resilient credit metrics amid the current weak operating environment, Fitch Ratings says. Weak retail sentiment amid the Chinese government's austerity drive and stiff competition from other retail channels has dampened department store sales in China. Golden Eagle said its gross sales proceeds rose 3.1% in 2013 while same-store sales increased by 2.9%. Growth for the two metrics slowed from 7.1% and 5.6% respectively in the first half of 2013. Fitch expects performance among department store operators in China, including Golden Eagle, to remain muted for the same reasons over the next 12-18 months. Golden Eagle's overall financial position remained healthy and liquidity was strong at the end of 2013. The company did not have any outstanding short-term borrowings at end-2013. The company's high ratio of retail space that is located in properties it owns and its tight cost control helped to stabilise its EBITDA margin at 47.3% at end-2013 (end-2012: 48.5%). The company's payables-adjusted FFO net leverage was stable at 2.39x (end-2012: 2.23x) after the company trimmed its capex due to weaker sentiment in 2013. The company has not revised its budgeted CNY2bn annual capex for the next three years, a level that is high compared with peers given the slower market conditions. However, the company has flexibility in trimming its capex, given that it owns 60% of its retail floor space, which would enable the company to maintain its leverage at a healthy level, should operating conditions deteriorate further. Contact: Michelle Leong Associate Director +852 2263 9929 Fitch (Hong Kong) Limited 28th Floor, Two Lippo Centre 89 Queensway, Hong Kong Vicki Shen Associate Director +852 2263 9918 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Related Research: 2014 Outlook: Chinese Department Stores dated 9 December 2013 Applicable Criteria and Related Research: 2014 Outlook: Chinese Department Stores here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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