20170920-DBS_Group-China_property_Sector_Guangzhou,_Foshan,_and_Zhongshan_trip_takeaways__improving_sales_office_traffic_13页_238kb

报告摘要

China Property Sector Summary

Core Content

This document provides an analysis of the China property sector, focusing on recent developments in Guangzhou, Foshan, and Zhongshan, as well as a valuation comparison of various property developers. The key points include the recovery of sales office traffic, the impact of presales permit controls on supply, and the potential for market consolidation.

Main Points

Sales Office Traffic Recovery: Sales office traffic has improved in all three cities, attributed to the end of summer holidays and better weather in Guangzhou, and buyers stepping out of their "wait and see" mode in Foshan and Zhongshan due to local tightening policies.
Presales Permit Controls: Strict control on presales permits has delayed supply in these cities. Developers are hesitant to apply for permits due to lower allowed ASPs than their expectations or secondary market prices.
Market Strategy Adjustments: In Foshan and Zhongshan, developers may be more inclined to launch new projects faster, as allowed ASPs in recent phases are lower than those sold last year.
Understatement of Sales: The online contract approval process and bundling renovation contracts with property sales may lead to an understatement of actual sales figures. Some developers report sales based on downpayment collection rather than online contract signing.
Market Share: The top 5 developers' market share in 8M17 is estimated at around 15%, compared to the US's peak level of 25% in 2007. This suggests room for market consolidation.
Positive Outlook: The monthly sales growth is expected to slow, but September and October may see a pickup. Single-digit growth is seen as satisfactory given the high base last year and YTD target achievement.
Valuation Support: Attractive valuations and high earnings growth relative to other sectors and A-share peers may support property sector share price performance.
Investment Recommendations: CIFI (884 HK), Yuzhou (1628 HK), and KWG (1813 HK) are highlighted as high-growth low PE plays. Yanlord (YLLG SP) and Yuexiu (123 HK) are seen as potential turnaround candidates.

Key Information

Valuation Comparison (20-Sep)

Company Name	Code	Price (HK$)	Market Cap (US$bn)	17F PE x	18F PE x	12-m Target (HK$)	EPS Growth 17F (%)	EPS Growth 18F (%)	Yield 17F (%)	Yield 18F (%)	ROE 17F (%)	ROE 18F (%)	Net Gearing 16A (%)	P/Bk x	NAV (HK$)	Discount to NAV (%)
China Overseas*	688 HK	28	39.3	9.4	8.7	28.28	(17)	8	3.2	3.5	14.0	13.8	7.3	1.3	26.0	(7.6)
CR Land*	1109 HK	27	24.0	9.8	8.5	28.79	(2)	15	2.7	3.2	15.4	15.9	23.8	1.6	28.0	3.7
China Vanke 'H'	2202 HK	27.95	47.4	10.5	9.0	25.00	17	17	4.2	4.9	20.3	20.9	25.9	2.3	23.0	(21.8)
Country Garden*	2007 HK	14.14	38.6	15.9	10.7	11.70	35	48	2.0	2.9	21.8	27.2	48.7	3.7	11.9	(19.2)
Evergrande*	3333 HK	29.05	48.8	12.9	7.9	27.72	407	62	0.0	11.0	43.6	56.1	119.8	7.5	18.3	(58.8)
Longfor*	960 HK	21.95	16.6	11.1	9.0	21.22	4	25	3.1	3.9	14.8	16.7	53.9	1.7	32.3	32.0
CIFI Holdings	884 HK	5.05	4.9	7.9	6.5	5.00	28	21	4.5	5.4	22.2	22.6	50.4	1.9	n.a.	n.a.
KWG Property	1813 HK	9.69	3.9	6.9	5.8	9.00	3	18	5.2	6.2	14.3	15.3	66.8	1.0	10.8	10.1
Yuexiu Property*	123 HK	1.72	2.7	12.5	10.4	1.59	(7)	21	3.2	3.9	4.6	5.3	53.1	0.6	3.2	45.8
Yanlord Land^	YLLG SP	1.775	2.6	6.4	5.5	2.25	(4)	16	2.7	2.9	11.7	12.3	16.3	0.8	3.2	43.7

PE Valuations (2008 to 2016 Trough)

Company Name	Code	Price (HK$)	Market Cap (US$bn)	17F PE x	18F PE x	Trough 2008	Trough 2009	Trough 2010	Trough 2011	Trough 2012	Trough 2013	Trough 2014	Trough 2015
China Overseas*	688 HK	28	39.3	9.4	8.7	9.7	11.1	12.8	6.5	7.1	8.5	9.9	8.7
CR Land*	1109 HK	27	24.0	9.8	8.5	15.9	13.1	14.4	7.2	10.1	11.2	12.8	9.7
China Vanke 'H'*	2202 HK	27.95	47.4	10.5	9.0	n.a.	n.a.	n.a.	n.a.	n.a.	6.3	6.8	6.5
Country Garden*	2007 HK	14.14	38.6	15.9	10.7	3.6	5.2	10.7	5.2	5.8	6.5	4.0	4.2
Evergrande*	3333 HK	29.05	48.8	12.9	7.9	n.a.	n.a.	3.8	2.9	3.3	4.2	3.4	4.3
Longfor*	960 HK	21.95	16.6	11.1	9.0	n.a.	17.8	13.8	6.3	5.6	7.4	5.3	5.4
Average				11.6	9.0	11.6	9.0	9.7	11.8	11.1	5.6	6.4	7.6

PE Valuations (2008 to 2016 Peak)

Company Name	Code	Price (HK$)	Market Cap (US$bn)	17F PE x	18F PE x	Peak 2008	Peak 2009	Peak 2010	Peak 2011	Peak 2012	Peak 2013	Peak 2014	Peak 2015	Peak 2016
China Overseas*	688 HK	28	39.3	9.4	8.7	9.4	8.7	9.7	11.1	12.8	6.5	7.1	7.8
CR Land*	1109 HK	27	24.0	9.8	8.5	9.8	8.5	15.9	13.1	14.4	7.2	10.1	11.9
China Vanke 'H'*	2202 HK	27.95	47.4	10.5	9.0	n.a.	n.a.	n.a.	n.a.	n.a.	6.3	6.8	6.5
Country Garden*	2007 HK	14.14	38.6	15.9	10.7	15.9	10.7	3.6	5.2	10.7	5.2	5.8	6.5
Evergrande*	3333 HK	29.05	48.8	12.9	7.9	12.9	7.9	n.a.	n.a.	n.a.	9.1	8.9	6.1
Longfor*	960 HK	21.95	16.6	11.1	9.0	11.1	9.0	n.a.	24.4	21.7	14.2	11.9	10.4
Average				11.6	9.0	11.6	9.0	23.7	25.0	17.1	12.4	11.4	10.8	7.7

Conclusion

The China property sector is showing signs of recovery, particularly in Guangzhou, Foshan, and Zhongshan, with improved sales office traffic. However, strict presales permit controls have delayed supply, affecting the volume. The market may be understated due to the way sales are reported, and there is potential for consolidation. Valuations are attractive, and high-growth low PE stocks like CIFI, Yuzhou, and KWG are recommended, while Yanlord and Yuexiu may attract investor attention due to potential turnaround.

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