China State Construction International Holdings Ltd.

The negative outlook reflects low visibility over CSCI's deleveraging prospects in the next 12 months. We expect the company to continue to sign contracts for new investment projects in China that require material capital commitments. CSCI's ratio of funds from operations (FFO) to debt may fall short of our expectation if the company's deleveraging does not go as planned. We could lower the rating on CSCI if the company's ratio of FFO to debt remains below 20% with limited likelihood of improvement. The ratio could remain under pressure if: (1) CSCI continues to rely on debt to finance investment projects; or (2) competition in China continues to squeeze project profitability, weakening the company's cash flows. We could revise the outlook

...An established position in core markets and rising presence in mainland China support new contract wins and steady revenue growth. China State Construction International Holdings Ltd. (CSCI) has good brand recognition and satisfactory execution record in complex engineering and construction (E&C) projects. The company also has good relationships with local governments and has been awarded a number of infrastructure-construction projects, given its status as a subsidiary of China State Construction Engineering Corp. Ltd. (CSCEC), which is a large central state-owned enterprise (SOE). We expect CSCI to continue to obtain healthy new contract orders and generate stable revenue growth over the next 12-24 months. CSCI benefits from stable cash business in Hong Kong and Macau. CSCI has a strong presence and 35 years of operating history with over 1,000 completed projects in Hong Kong and Macau construction markets. These factors give the company a stable flow of new contracts. The cash E&C construction...

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