20180703-兴业金融证券-华南城-01668.HK-Reigniting_Growth_Engine_15页_728kb

报告摘要

China South City Holdings Summary

Core Content

China South City Holdings (CSC) is a leading developer and operator of integrated logistics and trade centres in China, founded in 2002 and listed on the Hong Kong Exchange in September 2009. The company has demonstrated strong financial performance and growth potential, with analysts maintaining a Buy recommendation and updating the target price to HKD2.40 from HKD2.20, based on a 65% discount to its end-FY19F ENAV of HKD6.90.

Main Points

Earnings Beat: For FY18, CSC reported a core net profit of HKD1.6bn, a 19% YoY increase, exceeding the analysts' estimate by 4.8%. The positive surprise was driven by a 43.3% GPM (better than the estimated 41.2%) and lower SG&A expenses.
Sales Target: CSC announced a FY19F sales target of HKD16bn, representing a 33% YoY increase. This is in line with the analysts' and peers' growth expectations of 25-30%.
GPM Sustainability: With a landbank of average cost CNY418.4 per sqm, the company is expected to maintain a GPM of 40% or above for the foreseeable future, gradually declining to 41.7% in FY21F.
Recurring Income Growth: The company's recurring income, including property management, logistics, and e-commerce, is expected to grow at a CAGR of 20.3% from FY18F to FY21F, providing defensiveness to the stock.
Valuation: The current valuation is at a 75% discount, considered undemanding given the 18.6% CAGR in earnings and 14-15% ROE over FY19F to FY21F.
Dividend Yield: The dividend yield is projected to increase from 3.3% in FY18 to 5.9% in FY21, with a dividend payout ratio of 10% expected for FY19F to FY21F.
Net Debt to Equity: This is expected to decline from 77.4% in FY18 to 61.2% in FY21F, indicating improved financial health.

Key Financial Metrics (FY18F - FY21F)

Metric	Mar-18	Mar-19F	Mar-20F	Mar-21F
Recurring EPS (HKD)	0.20	0.24	0.30	0.33
DPS (HKD)	0.05	0.07	0.08	0.09
Recurring P/E (x)	7.62	6.27	5.10	4.57
P/B (x)	0.34	0.30	0.26	0.23
Dividend Yield (%)	3.3	4.6	5.3	5.9
Return on average equity (%)	14.0	14.6	14.7	14.3
Return on average assets (%)	4.5	4.6	4.5	4.4
Net debt to equity (%)	77.4	61.5	58.9	61.2

Key Risks

Weak Sales for Wholesale Trade Centres: This could impact overall sales performance.
Further Crackdown on Developers' Financing: May affect the company's ability to finance new projects.

Analysts

Toni Ho CFA: +852 2103 5888, toni.ho@rhbgroup.com
Angelo Wong: +852 2103 9218, angelo.wong@rhbgroup.com

Share Performance

Period	Absolute (%)	Relative (%)
YTD	-25.4	-20.6
1m	-11.1	-4.6
3m	-13.6	-8.3
6m	-25.4	-20.6
12m	6.3	3.5

Share Data

Market Cap: USD1,561m
Bloomberg Ticker: 1668 HK
Avg Daily Turnover (HKD/USD): 29.4m/3.68m
52-wk Price Low/High (HKD): 1.44 - 2.41
Free Float (%): 53
Shares Outstanding (m): 8,010
Estimated Return (%): 57
Shareholders (%):
- Cheng Chung Hing: 26.9%
- Tencent: 11.6%
- Cheng Tai Po: 7.4%

Revenue and Profit Growth

Metric	Mar-17	Mar-18	Mar-19F	Mar-20F	Mar-21F
Revenue Growth (%)	27.7	20.0	36.4	26.1	16.5
Gross Margin (%)	44.8	43.3	42.7	42.0	41.7
Net Profit Margin (%)	55.1	48.0	44.1	40.0	38.1

Conclusion

CSC is positioned to reignite growth through accelerating sales and recurring income, supported by a strong GPM and diversified revenue streams. Despite some downside risks, the company's financial health and growth trajectory support the BUY recommendation with a target price of HKD2.40.

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