20131211-DBS_Group-Likely_to_beat_sales_target_13页_267kb

Franshion Summary

Core Content

Franshion, a Chinese property developer, has shown strong performance and growth potential, leading to an updated price target and a revised outlook. The report highlights the company's progress in sales, strategic partnerships, and valuation metrics, suggesting that it is currently undervalued.

Main Points

• Sales Performance:

  • Franshion has exceeded its Rmb13bn property sales target for 2013, with presales reaching close to Rmb14bn as of November.
  • The en-bloc sale of office space in Shanghai added Rmb0.5-0.6bn to the sales figures.
  • Additional sales from the Beijing Yizhuang project and other projects are expected to push total sales to Rmb19.5-20bn, a year-on-year increase of approximately 30%.

• Strategic Partnerships:

  • Franshion sold a 49% interest in the Ningbo project to Blackrock for US$128m, which is a 10% premium over the initial land price.
  • This partnership is expected to strengthen the company's cash position while maintaining control over the projects.

• Valuation Update:

  • The price target for Franshion has been revised upward to HK$3.76 from the previous HK$3.74.
  • The current valuation is at a 59% discount to NAV, with a 6.4x PE and 0.9x P/BV, both of which are below historical averages.
  • The report suggests that the current valuation is attractive, especially considering the company's growth prospects.

• Outlook for 2014:

  • The report maintains a "BUY" rating for Franshion.
  • It expects more than 30% growth in presales for 2014 due to increased saleable resources.
  • A potential spin-off of the hotel business in 2014 could unlock additional value and fuel growth.

Key Information

• Financial Metrics (FY Dec):

  • Turnover: HK$17,176m
  • EBITDA: HK$7,768m
  • Pre-tax Profit: HK$6,723m
  • Net Profit: HK$3,378m
  • Core Net Profit: HK$2,158m
  • Core Net Profit after Perpetuals: HK$1,842m
  • EPS: HK$0.33
  • EPS Growth: 51.0%
  • Diluted EPS: HK$0.28
  • DPS: HK$0.07
  • BV Per Share: HK$2.65
  • PE: 7.6
  • EV/EBITDA: 5.9
  • Net Div Yield: 2.8%
  • P/Book Value: 1.0
  • Net Debt/Equity: 0.4
  • ROAE: 12.3%

• Company Overview:

  • Industry: Financials
  • Sector: Real Estate Holding & Development
  • Principal Business: China property development
  • Source of Data: Company, DBS Vickers, Thomson Reuters, HKEX

• Market Data:

  • Issued Capital: 9,161 million shares
  • Market Cap: HK$23,362m / US$3,013m
  • Major Shareholders: Sinochem Corporation (62.87%), Warburg Pincus & Co. (8.01%), Government of Singapore Investment Corporation Pte Ltd (5.02%)
  • Free Float: 24.10%
  • Average Daily Volume: 4.8 million shares

• Discount to NAV:

  • Franshion is currently trading at a 59% discount to NAV.
  • The report suggests that this discount is attractive, indicating potential for value appreciation.

Valuation Comparison

Conclusion

Franshion is currently trading at a significant discount to its NAV, with strong sales performance and strategic partnerships indicating a positive outlook for the future. The updated price target of HK$3.76 reflects the potential for growth and value unlocking in the coming year.