HK_Shimao_Company Update_20150108_RHB
Transcription
HK_Shimao_Company Update_20150108_RHB
Company Update, 9 January 2015 Shimao Property Holdings (813 HK) Buy (Maintained) Property - Real Estate Market Cap: USD8,248m Target Price: Price: HKD22.80 HKD18.40 Macro Risks Large Exposure In Major Cities a Boon Growth Value Shimao Property (813 HK) Price Close Relative to Hang Seng Index (RHS) 20.0 105 19.0 101 18.0 96 17.0 92 16.0 88 15.0 83 14.0 79 13.0 74 12.0 60 70 We like Shimao's good positioning in Tier-1 and -2 cities and see a low risk of it being embroiled in China's anti-corruption drive. Maintain BUY, but raise TP to HKD22.80 (from HK20.30, 23.9% upside) on a slightly higher HKD30.40 end-FY15 ENAV and lower target NAV discount of 25% (from 30%). We expect the counter's strong performance to continue. This report marks the transfer of coverage to Toni Ho. ♦ 50 40 30 ♦ Nov-14 Sep-14 Jul-14 May-14 Mar-14 10 Jan-14 Vol m 20 Source: Bloomberg Avg Turnover (HKD/USD) Cons. Upside (%) Upside (%) 52-wk Price low/high (HKD) Free float (%) Share outstanding (m) Shareholders (%) Hui Wing Mau 164m/21.1m 11.4 23.9 13.3 - 19.0 36 3,473 64.5 Share Performance (%) YTD 1m 3m 6m 12m 6.2 (0.2) 9.5 13.3 4.2 ♦ Appropriate strategy of focusing on more prosperous regions. We notice that China’s major Tier-1 and -2 cities have been leading the property market’s turnaround since 4Q14 in terms of transaction volumes and selling price rebounds. We also think the interest rate cut, mortgage loosening and policy relaxation will boost the purchasing power of firsttime buyers and upgraders. Therefore, we expect large-scale developers with significant exposure in such cities and the mid-range to high-end residential property segments to continue to outperform. In this aspect, we like Shimao Property (Shimao), given its strong presence in robust Tier-1 and -2 cities, especially in Fujian province and the Yangtze River Delta (YRD) region, which contribute one-third to its total saleable resources. A relatively safe play amid concerns over the anti-corruption drive. This campaign has aroused anxieties over the legal accountability of high-level management and developers’ shareholders. We suggest for investors to avoid developers holding large-size projects with abnormally low land costs or a significant reliance on particular cities, given that these characteristics are more eligible for legitimate risks. Besides the state-owned enterprises (SOEs), we prefer large scale, nationwide developers with more even geographical distribution and reasonable land costs for their landbank. We believe Shimao will suffer less from such private enterprise concerns, given its transparent land acquisition approach and operational track record. Lift TP to HKD22.80 (from HKD20.30) and maintain BUY. We lift our ENAV slightly to HKD30.40 (from HKD29.00) to reflect slightly higher market values of its properties. We also use a narrower target end-FY15 ENAV discount of 25% (+1SD of its past 5-year forward mean) vs 30% previously to reflect its better fundamentals. These changes have led us to raise our TP for this stock. Forecasts and Valuations Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F Total turnover (CNYm) 26,031 28,652 41,503 57,332 67,848 Reported net profit (CNYm) 5,723 5,765 7,390 9,449 9,572 Recurring net profit (CNYm) 4,078 4,387 7,319 8,626 9,572 Recurring net profit growth (%) 38.6 7.6 66.8 17.9 11.0 Recurring EPS (CNY) 1.16 1.27 2.11 2.49 2.76 Toni Ho +852 2103 5888 DPS (CNY) 0.32 0.45 0.63 0.82 0.83 [email protected] Recurring P/E (x) 12.8 11.7 7.0 5.9 5.3 P/B (x) 1.71 1.43 1.23 1.06 0.92 Absolute Relative 5.9 1.3 7.7 12.7 1.2 Shariah compliant Dividend Yield (%) Return on average equity (%) Return on average assets (%) Net debt to equity (%) Our vs consensus EPS (adjusted) (%) 2.2 3.0 4.3 5.6 5.6 20.0 17.3 19.0 21.0 18.5 5.4 4.6 4.8 5.0 4.6 81.6 55.9 57.4 49.8 45.9 (2.3) (5.4) Source: Company data, RHB See important disclosures at the end of this report Powered by EFATM Platform 1 Shimao Property Holdings (813 HK) 9 January 2015 Approaching a Contracted Sales Rebound Steady growth of contracted sales in FY14 despite the high base. Shimao’s execution ability in terms of contracted sales was clearly demonstrated through the explosive growth of contracted sales revenue in FY12 and FY13, where the company achieved 50.3% and 45.5% YoY growth respectively. Its strategy to concentrate on end-user demand and the mid-range to high-end segments received an overwhelming response. Despite the high base in FY13, Shimao still managed to record 4.5% YoY growth for its 11M14 revenue. This growth was somewhat dragged down, however, by the delay in new project launches and some slow-moving inventory clearance. Having said that, we noticed that Shimao accelerated its sales progress since Sep 2014 and we anticipate for it to still manage to record 8% YoY growth in terms of FY14 contracted sales revenue. Also, in spite of the inventory clearance pressure throughout FY14, contracted ASP remained stable at CNY12,000/sqm. ♦ We expect contracted sales to rebound in 1Q15 Abundant saleable resources to enjoy the momentum in Tier-1 cities. Recently, Beijing lifted the provident fund loan ceiling for first-time buyers, while local media such as Sina have reported that Shanghai may be relaxing its home purchase restriction (HPR) soon. Shimao holds plenty of saleable resources in Tier-1 and -2 cities like Beijing, Nanjing, Wuhan, Suzhou, Xiamen and Chengdu. Due to the delays in some of its new project launches, we believe the company is going to achieve a catch-up in terms of contracted sales in 1Q15. The timing coincides with a rebound in the sentiment of the property market, which has been boosted by the interest rate cut, mortgage loosening and policy relief. Moreover, as the hope of further policy relaxation in Tier-1 cities is mounting this year, we regard Shimao is being in a favourable position to benefit from this momentum going forward. Figure 1: Shimao’s monthly contracted sales revenue and ASPs (CNY bn) Stable ASP thoughout 2014 9.0 8.0 7.0 (CNY/sqm) 20,000 15,000 6.0 5.0 10,000 4.0 3.0 5,000 2.0 1.0 - - Contracted sales revenue Contracted ASP Source: Company data, RHB See important disclosures at the end of this report 2 Shimao Property Holdings (813 HK) 9 January 2015 Figure 2: Shimao’s quarterly contracted sales revenue Figure 3: Shimao’s yearly contracted sales revenue and YoY change (CNY m) Steady YOY growth in 2Q14 and 3Q14 25 80 60% 50.3% 20.32 15 18.58 60 15.57 15.16 (CNY m) 18.97 18.81 20 13.23 50% 40% 46.09 13.36 11.79 64.06 45.5% 35.6% 13.72 67.07 40 10.40 30% 30.66 30.50 10 7.31 20% 20 5 10% 0.5% - - 0% FY10 FY11 FY12 FY13 Contracted sales revenue (LHS) *as at the end of Nov 2014 Source: Company data, RHB 11M14 YoY change (RHS) Source: Company data, RHB Healthy Financial Position And Profit Margin Healthy leverage level thanks to prudent budgeting. Shimao has adopted a cautious capex approach in recent years, which determines land acquisition and other capital outflow based on cash inflow from contracted sales. It even allowed land purchases in some regions only after their contracted sales met respective targets. Thus, Shimao has managed to record net cash inflows and a gradual decrease in net gearing over the past few years. Supported by the robust contracted sales, we expect the declining leverage trend will be maintained going forward. Slight decline in gross margins but has stayed competitive among peers. Given the booking of the inventory clearance sales, we expect Shimao to likely show slight declines in FY14F and FY15F gross margins. Nevertheless, its overall gross margins should still be well-supported by other new and fast-selling projects. We predict that they will stabilise in the 33-35% range. Moreover, we regard Shimao’s gross margins range as remaining well above the sector average of 25-30%. Figure 4: Shimao’s net gearing ratio Figure 5: Shimao’s gross margins 90% Gross margin stayed above sector average of 25-30% 50% 81.6% 80% 70% 67.9% 40% 55.9% 60% 36.6% 38.4% 33.5% 57.4% 49.8% 50% 45.9% 35.3% 34.5% FY13 FY14F 33.3% 30% 40% 20% 30% 20% 10% 10% 0% 0% FY10 FY11 FY12 FY13 FY14F Source: Company data, RHB See important disclosures at the end of this report FY15F FY10 FY11 FY12 FY15F Source: Company data, RHB 3 Shimao Property Holdings (813 HK) 9 January 2015 Figure 6: Appraised NAV of Shimao Value Value % of GAV (CNY m) (CNY m) (%) Property development: - Shanghai 25,047 16.3 - Yangtze River Delta (excl. Shanghai) 29,744 19.4 - Northeastern and Bohai Rim 22,239 14.5 - Others 15,375 10.0 92,405 60.2 Investment properties 26,181 17.1 Hotels 13,674 8.9 Cash 21,132 13.8 Gross asset value 153,392 100.0 Total borrowings (54,698) Outstanding land premium (14,200) Net asset value 84,494 NAV (HKD m) 105,618 NAV per share (HKD) 30.40 Target discount (%) 25% Target price (HKD) 22.80 Source: RHB Figure 7: Shimao's 5-year rolling forward NAV band 26.0 +2SD = 14% discount 24.0 22.0 +1SD = 26% discount Share Price (HKD) 20.0 18.0 Mean = 39% discount 16.0 14.0 -1SD = 52% discount 12.0 10.0 -2SD = 65% discount 8.0 6.0 4.0 2.0 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Source: RHB See important disclosures at the end of this report 4 Shimao Property Holdings (813 HK) 9 January 2015 Financial Exhibits Profit & Loss (CNYm) Dec-11 Dec-12 Dec-13 Dec-14F Total turnover 26,031 28,652 41,503 57,332 67,848 Cost of sales (16,031) (19,046) (26,862) (37,535) (45,270) Gross profit 10,000 9,606 14,641 19,797 22,579 Gen & admin expenses (1,541) (2,083) (2,875) (3,127) (3,372) (770) (1,047) (1,306) (1,449) (1,686) Selling expenses Dec-15F Operating profit 7,689 6,476 10,460 15,221 17,521 Operating EBITDA 7,987 6,823 10,833 15,641 17,966 Depreciation of fixed assets Operating EBIT (298) (347) (373) (419) (445) 7,689 6,476 10,460 15,221 17,521 Net income from investments 122 152 844 813 1,310 Interest income 100 146 191 172 247 Interest expense (480) (168) (312) (364) (379) Exceptional income - net 3,321 3,559 1,876 1,219 - Pre-tax profit 10,752 10,165 13,059 17,061 18,699 Taxation (4,303) (3,581) (4,834) (6,284) (7,112) (726) (819) (835) (1,328) (2,015) Minority interests Profit after tax & minorities 5,723 5,765 7,390 9,449 9,572 Reported net profit 5,723 5,765 7,390 9,449 9,572 Recurring net profit 4,078 4,387 7,319 8,626 9,572 Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F 7,689 6,476 10,460 15,221 17,521 298 347 373 419 445 1,469 16,034 12,403 17,829 9,449 438 681 1,053 Operating cash flow 9,894 23,538 24,289 33,182 Interest paid (2,916) (3,169) (3,487) (3,639) (3,786) Tax paid (2,443) (3,095) (3,613) (5,377) (6,768) Source: Company data, RHB Cash flow (CNYm) Operating profit Depreciation & amortisation Change in working capital Other operating cash flow Cash flow from operations Capex Other new investments Other investing cash flow Cash flow from investing activities Dividends paid Proceeds from issue of shares Increase in debt Other financing cash flow Cash flow from financing activities Cash at beginning of period (287) 27,416 4,535 17,274 17,189 24,166 16,862 (10,767) (12,506) (31,750) (20,836) (15,600) (646) (1,723) (1,251) 349 991 (1,734) (11,669) (12,161) (34,130) (22,387) (15,353) (1,382) (508) (1,516) (3,057) (2,011) 30 - - - (463) 9,345 5,369 2,000 12 8,696 172 - (646) (425) 247 33 (589) 10,357 7,359 (1,530) 18,186 1,887 (1,019) (1,008) 12,140 12,313 15,894 17,026 20,692 Total cash generated 225 3,583 1,245 3,666 490 Forex effects (52) Implied cash at end of period 12,313 (2) 15,894 (113) 17,026 - - 20,692 21,182 Source: Company data, RHB See important disclosures at the end of this report 5 Shimao Property Holdings (813 HK) 9 January 2015 Financial Exhibits Balance Sheet (CNYm) Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F Total cash and equivalents 13,994 18,098 19,573 23,637 24,127 Accounts receivable 4,472 6,639 11,217 13,088 13,088 Other current assets 54,741 53,869 87,159 103,729 112,497 Total current assets 73,207 78,606 117,949 140,454 149,712 Total investments 26,450 33,656 36,633 39,285 42,595 Tangible fixed assets 14,007 15,177 18,031 20,112 20,266 3,578 3,388 3,155 3,200 3,200 44,035 52,221 57,819 62,597 66,061 Total other assets Total non-current assets Total assets 117,242 130,827 175,768 203,050 215,773 Short-term debt 14,983 12,381 11,775 12,680 12,680 Accounts payable 17,317 14,316 20,995 24,839 24,839 Other current liabilities 19,173 30,815 49,606 56,956 59,110 Total current liabilities 51,473 57,512 82,376 94,475 96,629 Total long-term debt 27,578 28,613 37,554 42,018 44,018 3,173 3,775 3,986 4,239 4,239 Total non-current liabilities 30,751 32,388 41,540 46,257 48,257 Total liabilities 82,224 89,900 123,916 140,732 144,886 358 356 356 356 356 Other reserves 30,234 35,551 41,386 47,682 55,243 Shareholders' equity 30,592 35,907 41,742 48,038 55,599 4,426 5,020 10,110 14,280 15,288 35,018 40,927 51,852 62,319 70,887 117,242 130,827 175,768 203,050 215,773 Other liabilities Share capital Minority interests Total equity Total liabilities & equity Source: Company data, RHB Key Ratios (CNY) Dec-11 Dec-12 Dec-13 Dec-14F Dec-15F Revenue growth (%) 19.5 10.1 44.9 38.1 18.3 Operating profit growth (%) 25.0 (15.8) 61.5 45.5 15.1 Net profit growth (%) 22.5 0.7 28.2 27.9 1.3 EPS growth (%) 23.1 2.5 28.3 28.0 1.2 Bv per share growth (%) 14.6 19.9 16.3 15.5 15.6 Operating margin (%) 29.5 22.6 25.2 26.5 25.8 Net profit margin (%) 22.0 20.1 17.8 16.5 14.1 Return on average assets (%) 5.4 4.6 4.8 5.0 4.6 Return on average equity (%) 20.0 17.3 19.0 21.0 18.5 Net debt to equity (%) 81.6 55.9 57.4 49.8 45.9 DPS 0.32 0.45 0.63 0.82 0.83 Recurrent cash flow per share 1.29 4.98 4.96 6.98 4.87 Source: Company data, RHB See important disclosures at the end of this report 6 Shimao Property Holdings (813 HK) 9 January 2015 SWOT Analysis • Strong presence in Fujian province and Yangtze River Delta (YRD) region, where end-user demand remains solid • Financial difficulties or political issues of individual developers may provoke fears for the sector • Undemanding financial position and competitive profit margin among peers • Possible contracted sales catch-up. • Contracted sales rebound may take a break during the traditional low season of the Chinese New Year • Hope of policy relaxation in Tier-1 cities • The mortgage loosening to first-time buyers and interest rate cut strengthen purchasing power of endusers • The inventory clearance and some slow-moving projects remain a drag on contracted sales • Challenges of oversupply in some cities and price cuts from other developers remain intact P/E (x) vs EPS growth P/BV (x) vs ROAE 2 5% 0 0% P/E (x) (lhs) EPS growth (rhs) Source: Company data, RHB 1.5 15% 1.0 10% 0.5 5% 0.0 0% P/B (x) (lhs) Jan-15 10% 20% Jan-14 4 2.0 Jan-13 15% 25% Jan-12 6 2.5 Jan-11 20% Jan-15 8 Jan-14 25% Jan-13 10 Jan-12 30% Jan-11 12 Return on average equity (rhs) Source: Company data, RHB Company Profile Shimao Property (Shimao) is one of the leading Mainland China property developers, and focuses on residential, commercial and hotel developments. The company primarily concentrates on the Yangtze River Delta (YRD) region, although its presence has now spread over all of China’s major regions. The Shimao brand, together with some of its hotels and commercial properties, are well-known in China. The company currently has an attributable landbank of 36.9m sqm, covering 112 projects in 42 cities. See important disclosures at the end of this report 7 Shimao Property Holdings (813 HK) 9 January 2015 Recommendation Chart Price Close 20.3 19.3 20.4 21.6 22.7 Recommendations & Target Price 22.9 20.4 na 22.4 18.4 16.4 14.4 12.4 10.4 8.4 6.4 Buy 4.4 Jan-10 Neutral Sell Apr-11 Trading Buy Jul-12 Take Prof it Not Rated Nov-13 Source: RHB, Bloomberg Date Recommendation Target Price Price 2014-09-11 Buy 20.3 17.5 2014-05-16 Buy 19.3 15.0 2014-03-26 Buy 20.4 16.0 2014-01-28 Buy 21.6 17.0 2013-11-29 Buy 22.7 19.4 2013-09-30 Buy 22.9 17.8 Source: RHB, Bloomberg See important disclosures at the end of this report 8 RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. 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