Fitch Ratings has affirmed
The Outlook on the IDR is Stable.
Fitch has also affirmed the 'BBB+' ratings on the outstanding
The affirmation reflects CSCI's strong linkages with its direct parent,
Key Rating Drivers
Rating Linked to Parent: CSCI's ratings are notched down from our assessment of the creditworthiness of COHL. We assess COHL's legal incentive to support CSCI as 'Medium' given the cross-default clauses in COHL's bank loan documents, where CSCI's default will lead to acceleration at the COHL level. We also assess COHL's strategic and operational incentive to support CSCI as 'Medium' given its financial contribution to the parent and its position as the parents' key platform for the construction of social housing. CSCI made up 20%, 14% and 20% of COHL's revenue, EBITDA and debt in 2021, respectively.
Strong Growth in 2022: Fitch expects CSCI's revenue to rise by 25% to around
Deleveraging on Improved Cash Flows: We expect CSCI's leverage, measured by net debt to EBITDA, to improve towards 4.5x over the next few years, driven by improving cash flow from operations (CFO) and decreasing cash investments in public-private partnership (PPP) projects. CSCI has been reducing its exposure to PPP projects over the last two years, and some of these projects have been completed and have started to generate cash inflow, which offset cash outflows for PPP projects under construction.
CSCI's CFO has been improving over the last 18 months. We believe the improvement is partly driven by the company's increased participation in government-targeted repurchase (GTR) projects, which have faster turnover than PPP projects. Strong growth in
Derivation Summary
CSCI's ratings are notched down from our internal assessment of its parent COHL's creditworthiness, based on our Parent and Subsidiary Linkage Rating Criteria and our assessment of 'Medium' legal, operational and strategic incentives for its parent to provide support. Its rating is not derived from its Standalone Credit Profile and therefore is not comparable with industry peers.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Revenue growth of 25% in 2022 and 5%-8% in 2023-2025;
EBITDA margin stable at around 12% in 2022-2025;
Capital intensity of 0.9% in 2022-2025
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Improvement in the credit profiles of CSCI's parents;
Stronger linkages between CSCI and its parents.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Weakening of the credit profiles of CSCI's parents;
Weaker linkages between CSCI and its parents.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Sufficient Liquidity: CSCI had
Issuer Profile
CSCI is one of the largest general contractors in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
CSCI's rating is derived from its strong parental linkages. CSCI is 65%-owned by COHL, which is wholly owned by
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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