China Property Monthly

Transcription

1 Research Sector Report China Property Monthly Hong Kong China GFA sold declined by 6.9% yoy as of April GFA sold declined by 6.9% yoy as of April. According to China NBS, as of April 2014, real estate investment increased by 16.4% yoy to Rmb2.2 tn; residential investment increased by 16.6% yoy to Rmb1.5 tn; GFA under construction increased by 12.8% yoy to 5.6 bn sq.m.; Newly-started GFA decreased by 22.1% yoy to 0.4 bn sq.m.; total GFA sold declined by 6.9% yoy to 0.28 bn sq.m; total property sales declined by 7.8% yoy to Rmb1.8 tn. Residential GFA sold declined in major cities. According to CRIC data, as of April 2014, residential GFA sold declined yoy in major cities in China. GFA sold in Beijing, Shanghai, Guangzhou, Shenzhen and Tianjin declined by 53%, 13%, 38%, 34% and 18% yoy respectively. In the first 2 weeks of May, GFA sold in Tianjin recovered by 9%yoy. Rating: Rating Change: Top Pick Country Garden (02007 HK) Guangzhou R&F (02777 HK) Country Garden Neutral Maintained Properties ASP review. According to China NBS survey on 70 major cities, in April 2014, 8 cities reported mom ASP decline; 18 cities reported flat ASP; 44 cities reported mom ASP increase. China developers: YTD contract sales review. As of April, Country Garden (02007), Evergrande (03333) and Guangzhou R&F (02777) achieved contract sales growth of 78%, 78% and 51% respectively. COLI (00688), CR Land (01109), Shimao (00813), Longfor (00960), Poly-A ( ) booked declining contracts sales. (Source: Bloomberg) Most china developers underperformed the market YTD. Due to negative contract sales outlook, most property stocks underperformed market. In terms of share price performance, Evergrande (03333) and Wuzhou International (01369) are best performers YTD. Sector valuation undemanding; low earnings visibility; limited share price catalyst. China property stocks are traded at 5.7 x 2014 PER on average. This sector s valuation is undemanding, in our view. We see limited catalyst for this sector. We prefer developers with robust presales YTD. Our Top Picks are Guangzhou R&F (02777) and Country Garden (02007). Analyst Dennis Yao SFC CE Number:ALK994 Tel: (852) dennisyao@gfgroup.com.hk GF Securities (Hong Kong) Brokerage Limited ( GF Securities (Hong Kong) ) 29-30/F, Li Po Chun Chambers, 189 Des Voeux Road Central, H.K. Company Name Code Price (HK$) Our Rating Our Target Price (HK$) 14 PER 13 P/B YTD share price performance (%) COLI Buy CR Land Buy Country Garden Buy Guangzhou R&F Buy Shenzhen Investment Hold Future Holdings Hold Wuzhou International Buy Source.. Company data, Bloomberg, GF Securities (Hong Kong)

2 Transaction volume in as of April 2014: GFA sold declined by 6.9% yoy According to China NBS, as of April 2014, real estate investment increased by 16.4% yoy to Rmb2.2 tn; residential investment increased by 16.6% yoy to Rmb1.5 tn; GFA under construction increased by 12.8% yoy to 5.6 bn sq.m.; Newly-started GFA decreased by 22.1% yoy to 0.4 bn sq.m.; total GFA sold declined by 6.9% yoy to 0.28 bn sq.m.; total property sales declined by 7.8% yoy to Rmb1.8 tn. Residential GFA sold declined in major cities. According to CRIC data, as of April 2014, residential GFA sold declined yoy in major cities in China. GFA sold in Beijing, Shanghai, Guangzhou, Shenzhen and Tianjin declined by 53%, 13%, 38%, 34% and 18% yoy respectively. In the first 2 weeks of May, GFA sold in Tianjin recovered by 9%yoy. Properties ASP review. According to China NBS survey on 70 major cities, in April 2014, 8 cities reported mom ASP decline; 18 cities reported flat ASP; 44 cities reported mom ASP increase. Residential GFA sold(mn sq.m.) Beijing Chengdu Changchun Changsha Dongguan Dalian Fuzhou Guangzhou Hangzhou As of April, yoy -53% -20% -16% -28% -33% -22% -48% -38% -38% In the first two weeks of May yoy -33% -46% -23% -15% -27% -37% -40% -15% -18% Residential GFA sold(mn sq.m.) Nanjin Nanchang Qingdao Shanghai Shenzhen Suzhou Tianjin Xi'an Wuhan As of April, yoy -23% 64% -28% -13% -34% -14% -18% -32% 0% Source: CRIC In the first two weeks of May yoy -34% -7% -46% -16% -46% 6% 9% -8% -20% China developers contract sales review. As of 1Q14, Country Garden (02007), Evergrande (03333) and Guangzhou R&F (02777) achieved contract sales growth of 78%, 78% and 51% respectively. COLI (00688), CR Land (01109), Shimao (00813), Longfor (00960), Poly-A ( ) booked declining contracts sales. Sales Update (as of Apr 2014) Stock code Contract sales growth rate (yoy) Contract sales (Rmb bn) GFA sold growth rate(yoy) GFA sold (mn sq.m.) ASP (Rmb/sq.m.) China Nationwide Property Sales -8% 1.83(Rmb tn) -7% ,606 Country Garden % % 6.3 6,549 Evergrande % % 6.4 6,980 Guangzhou R&F % % ,833 Wuzhou International % % 0.1 7,635 Agile % % ,917 Future Holdings % % 0.6 9,654 China Vanke-A share % % ,775 China Merchants Properties-A share % % ,007 Companies with declining contract sales COLI * % 45.6 (HK$bn) -24% ,207(HK$) CR Land % % ,536 Shimao Properties % % ,287 Longfor % % ,003 Poly-A share % % ,802 Source: Company, China NBS Page 2 of 5

3 Valuation undemanding; softening local policies the key catalyst Most china developers underperformed the market YTD. Due to negative contract sales outlook, most property stocks underperformed market. In terms of share price performance, Evergrande (03333) and Wuzhou International (01369) are best performers YTD. Sector valuation undemanding; low earnings visibility. China property stocks are traded at 5.7 x 2014 PER and 1.1x2013 P/B on average. This sector s valuation is undemanding, in our view. We prefer developers with robust presales YTD. Our Top Picks are Guangzhou R&F (02777) and Country Garden (02007). Company Name Code Price (HK$) Our Rating Our Target Price (HK$) 14 PER 13 P/B YTD share price performance (%) COLI Buy CR Land Buy Country Garden Buy Guangzhou R&F Buy Shenzhen Investment Hold Future Holdings Hold Wuzhou International Buy Source.. Company data, Bloomberg, GF Securities (Hong Kong) Guangzhou R&F (02777): Contract sales target to increase by 66% yoy in For 2014, the company announced contract sales target of Rmb 70 bn (up 66% yoy) and delivery target of 3.7 mn sq.m.(up 37% yoy). The company will sell 63 projects in 22 cities in 2014, with total value over Rmb 140 bn. The counter is trading at 4.0x 2014 market consensus estimate EPS. Given its clear earnings growth prospect and mass-residential focus, its valuation is undemanding, in our view. Maintain Buy, with target price kept at HK$20.0, equal to 8.0x 2014 market consensus estimate EPS. Country Garden (02007): Abundant inventory; clear earnings growth visibility in We estimate presold but un-booked contract sales may reach Rmb 50 bn by Dec Thus the company is very likely to deliver 20+% yoy revenue/earnings growth in 2014, in our view. The counter is trading at 4.5x 2014 market consensus estimate EPS. Given its clear earnings growth prospect and mass-residential focus, its valuation is undemanding, in our view. Maintain Buy, with target price kept at HK$5.0, equal to 7.0x 2014 market consensus estimate EPS. Softening local policies may be a key catalyst. In our view, China property demand are shrinking due to tightening mortgage loans, ongoing home purchase limit policies and relatively high ASP. Softening local policies may be a key catalyst, especially certain softening of home purchase limit or mortgage loans in provincial capital cities in the future. Page 3 of 5

4 Company Rating Definition The Benchmark: Hong Kong Hang Seng Index Time Horizon: 12 months Rating Definition Buy Relative Performance >15%; or the fundamental outlook of the company or sector is favorable. Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Hold Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Underperform Relative Performance <-5%; or the fundamental outlook of the company or sector is unfavorable. Sector Rating Definition The Benchmark: Hong Kong Hang Seng Index Time Horizon: 12 months Rating Definition Positive Sector outperforms the Hang Seng Index by 10% or more; or the fundamental outlook of the sector is positive. Neutral Sector outperforms or underperforms the Hang Seng Index by -10% to 10%; or the fundamental outlook of the sector is stable. Cautious Sector underperforms the Hang Seng Index by 10% or more; or the fundamental outlook of the sector is negative. Analyst Certification The research analyst(s) is primarily responsible for the content of this research report, in whole or in part, certifies that with respect to the Company or relevant securities that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views on the Company or relevant securities mentioned herein; and (2) no part of his or her remuneration was, is, or will be, directly or indirectly, in connection with his or her specific recommendations or views expressed in the research report. DISCLOSURE OF INTERESTS (1) Proprietary trading division of GF Securities (Hong Kong) Brokerage Limited ( GF Securities (Hong Kong) )and/or its affiliated or associated companies do not hold any shares of the securities mentioned in this research report. 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