"While the investment amount is substantial, relative to Aoyuan's business scale , the company has adequate liquidity -- including unrestricted cash of RMB576 million as of June 2012, as well as total proceeds of around RMB3.4 billion from both the disposal of a Beijing asset and a bond issuance -- to support the purchase," says Kaven Tsang, a Moody's Vice President and Senior Analyst.

The land purchase will be settled in two equal installments, with one to be paid upfront and the second in November 2013. This payment term will not pressure the company's near-term liquidity.

Furthermore, Aoyuan has good development experience in Panyu which is one of its core markets in Guangdong province. Panyu accounts for around 9% of its total land bank of 8.8 million square meter (in gross floor area, GFA) as of June 2012.

The new land parcel -- located at the major tourist area in Panyu -- has a GFA of approximately 501,000 square meters. It will strengthen the company's market position within the district.

"Moody's expects Aoyuan's credit metrics to remain within its rating range after the purchase and with construction loans to develop the new project," says Tsang.

After factoring in the construction loans, EBITDA interest coverage will stay around 2x-2.5x and debt leverage -- as measured by adjusted debt/capitalization -- will remain at 45-50% in the next 1-2 years.

Aoyuan's B2 corporate family rating reflects its track record in property development in economically strong Guangdong province, and the strength of the company's management, which has guided Aoyuan through the last two down-cycles with some access to offshore bank debt funding.

Aoyuan's B2 corporate family rating is also constrained by the company's small scale and track record of volatility in sales and profitability.

The principal methodology used in rating China Aoyuan Property Group Limited was the Global Homebuilding Industry Methodology published in March 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

China Aoyuan Property Group Limited was founded in 1997 by Mr. Guo Zi Wen. In October 2007, the company listed on the Hong Kong Stock Exchange. As of 30 June 2012, it had 26 projects over 5 provinces, and in the cities of Chongqing and Beijing. Its total land bank amounted to 8.8 million sqm of gross floor area (GFA) as of June 2012. The company subsequently disposed of the project in Beijing in October 2012.

Kaven Tsang Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Gary Lau MD - Corporate Finance Corporate Finance Group JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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