Moody's shifts Zensun view to negative

Moody's Investors Service said it changed to negative from stable the outlook on Zensun Group Ltd. and its subsidiary Zensun Enterprises Ltd. At the same time, Moody's affirmed the B1 corporate family rating for Zensun; and the B2 backed senior unsecured rating on the bonds issued by Zensun Enterprises and guaranteed by its parent.

“The change in outlook to negative reflects our expectation that Zensun's credit metrics will likely deteriorate over the next six-12 months to levels that are weak for its current rating. This expectation is driven by concerns over Zensun's slowed cash flows, mainly the result of a lengthened cash collection cycle, and the company's restrained ability to achieve its business growth plan,” said Celine Yang, a Moody's assistant vice president and analyst, in a press release.

While Zensun achieved 4.3% growth in contracted sales to RMB 37.4 billion in 2019 (RMB 51.8 billion if including sales of resettlement housing), Moody's estimates the company's cash collection rate for its contracted sales fell to 60%-65% in the year from 72% in 2018, due to tight funding controls in Zhengzhou, Zensun's core market.

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