20180824-兴业金融证券-中国海外发展-00688.HK-Momentum_To_Pick_Up_In_FY19_14页_651kb

报告摘要

China Overseas Land Summary

Core Content and Key Points

China Overseas Land & Investment Ltd (COLI) is a leading property developer in China, with a strong financial position and a diverse range of operations. The company is a subsidiary of China State Construction Engineering Corporation, the largest construction conglomerate in China, and has expanded its presence to 42 major cities, as well as Hong Kong and Macau. COLI is engaged in property development, investment, management, and other related businesses.

The company's performance for the first half of 2018 (1H18) showed a slight increase in revenue, with a 1.6% YoY growth, and a 14.3% increase in core net profit. However, both figures were lower than the analysts' estimates by 18.2% and 7.9%, respectively. Despite this, the gross profit margin and net profit margin improved, reaching 35.8% and 21.6%, respectively, compared to 30.5% and 19.2% in 1H17. This indicates improved operational efficiency.

COLI's financial position is considered sturdy, with a net gearing ratio of 28.1% and a weighted average financing cost of 4.27%, both at industry-low levels. The company is expected to achieve a 33% YoY growth in contracted sales for 2H18F, with HKD500bn in saleable resources, and to hit its HKD290 sales target for FY18. By year-end, it should have HKD600bn in saleable resources available, supporting a 25-30% YoY growth in contracted sales for FY19F.

The company's investment properties (IP) business is growing, with 38 office buildings in operation and a gross floor area (GFA) of 2.3 million sqm. It also has 1.5 million sqm under construction and 2.1 million sqm available for future development. This positions COLI as the largest office landlord in China. Additionally, COLI has ventured into co-working spaces, with five projects in operation, showing an average occupancy rate of about 90% and effective rent premiums 160% above traditional offices nearby.

Despite the positive outlook for the future, there is a possible earnings growth gap in FY18F due to slower-than-peers contracted sales growth over the last two years. The company's earnings are expected to resume solid growth from FY19F onwards. The analysts have maintained their "Buy" rating, with a revised target price of HKD32.40, based on a 25% discount to the end-FY18F enterprise net asset value (ENAV) of HKD43.20. This target price offers a 33% upside from the current price of HKD24.50.

Key Financial Metrics

Metric	Dec-16	Dec-17	Dec-18F	Dec-19F	Dec-20F
Total turnover (HKDm)	164,069	166,045	182,769	250,265	312,056
Recurring net profit (HKDm)	31,370	34,257	36,542	48,445	61,360
Recurring net profit growth (%)	8.8	9.2	6.7	32.6	26.7
Recurring EPS (HKD)	2.86	3.13	3.34	4.42	5.60
DPS (HKD)	0.77	0.80	0.83	1.33	1.68
Recurring P/E (x)	8.54	7.82	7.33	5.53	4.37
P/B (x)	1.21	1.01	0.92	0.83	0.75
Dividend Yield (%)	3.1	3.3	3.4	5.4	6.9
Return on average equity (%)	17.1	16.7	14.6	15.8	18.0
Return on average assets (%)	6.4	6.7	5.9	6.1	6.6
Net debt to equity (%)	7.3	27.1	29.1	28.5	27.8
Our vs consensus EPS (adjusted) (%)	-	-	(9.1)	1.4	10.3

Key Risks and Financial Summary

Income Statement (HKDm)	Dec-16	Dec-17	Dec-18F	Dec-19F	Dec-20F
Total turnover	164,069	166,045	182,769	250,265	312,056
Gross profit	45,643	54,700	62,271	82,826	101,520
EBITDA	41,238	55,124	57,933	77,635	96,734
Depreciation and amortisation	(357)	(336)	(337)	(386)	(464)
Operating profit	40,881	54,788	57,596	77,249	96,270
Net interest	(2,056)	(1,394)	(1,552)	(1,596)	(1,612)
Income from associates & JVs	1,252	1,938	4,373	6,258	8,096
Pre-tax profit	57,102	63,419	65,825	81,911	102,754
Taxation	(18,711)	(21,277)	(23,590)	(31,462)	(38,790)
Minority interests	(1,370)	(1,375)	(1,636)	(2,004)	(2,605)
Recurring net profit	31,370	34,257	36,542	48,445	61,360

Balance Sheet and Cash Flow

Balance Sheet (HKDm)	Dec-16	Dec-17	Dec-18F	Dec-19F	Dec-20F
Total cash and equivalents	157,162	104,051	118,207	140,407	169,456
Tangible fixed assets	3,887	3,898	4,469	5,365	6,455
Total investments	83,132	118,015	120,316	124,951	131,554
Total other assets	9,358	21,702	30,995	43,976	60,829
Total assets	571,289	645,405	738,292	862,075	1,006,697
Short-term debt	40,286	30,424	34,262	39,096	45,279
Total long-term debt	133,534	147,815	171,311	195,481	226,397
Other liabilities	10,727	17,504	17,504	17,504	17,504
Total liabilities	343,866	371,861	438,107	531,975	639,626
Shareholders' equity	222,248	265,694	292,336	322,251	359,222
Minority interests	5,175	7,849	7,849	7,849	7,849
Total equity	227,423	273,543	300,185	330,100	367,072
Net debt	16,659	74,188	87,366	94,170	102,221
Total liabilities & equity	571,289	645,405	738,292	862,075	1,006,697

Valuation and Key Metrics

Valuation Metrics	Dec-16	Dec-17	Dec-18F	Dec-19F	Dec-20F
Recurring P/E (x)	8.54	7.82	7.33	5.53	4.37
P/E (x)	7.24	6.57	6.60	5.53	4.37
P/B (x)	1.21	1.01	0.92	0.83	0.75
FCF Yield (%)	11.6	(16.2)	(1.5)	2.4	3.6
Dividend Yield (%)	3.1	3.3	3.4	5.4	6.9
EV/EBITDA (x)	4.60	4.19	4.36	3.43	2.89
EV/EBIT (x)	4.64	4.21	4.39	3.44	2.91

Share Performance and Shareholders

Share Data
Avg Daily Turnover (HKD/USD)	455m/57.3m
52-wk Price low/high (HKD)	22.8 - 31.5
Free Float (%)	29
Shares outstanding (m)	10,956
Estimated Return	33%

Shareholders (%)
China State Construction Engineering Corporation	56.0
CITIC	10.0
JP Morgan	5.0

Interim Results and Forecast Adjustments

FY end Dec 31 (HKD m)	Actual 1H17	Actual 2H17	Actual 1H18	1H18F	RHB	BBG	Diff (%)
Turnover	87,199	78,846	88,601	1.6%	108,365	N/A	-18.2%
Property sales	85,328	76,812	86,301	1.1%	-	-	-
Property rental and mgmt	1,158	1,292	1,762	52.1%	-	-	-
Other operations	713	742	538	-24.6%	-	-	-
Cost of sales	(60,604)	(50,741)	(56,900)	-6.1%	-	-	-
Gross profit	26,595	28,104	31,701	19.2%	-	-	-
Other income and expenses	1,554	4,333	1,423	-8.4%	-	-	-
Selling and distribution exp	(1,061)	(1,889)	(1,100)	3.7%	-	-	-
Administrative expenses	(1,235)	(1,614)	(1,685)	36.5%	-	-	-
Operating profit	40,881	54,788	57,596	17.3%	-	-	-
Revaluation change	3,772	2,174	5,408	43.4%	-	-	-
Exceptionals	2,505	(365)	0	N/A	-	-	-
Finance cost	(651)	(743)	(690)	6.0%	-	-	-
Associates and JVs	1,390	548	2,088	50.2%	-	-	-
Profit before taxation	57,102	63,419	65,825	13.0%	-	-	-
Taxation	(18,711)	(21,277)	(23,590)	24.1%	-	-	-
Profit after taxation	38,391	42,142	42,234	50,449	63,965	-	-
Minority interests	(1,370)	(1,375)	(1,636)	(2,004)	(2,605)	-	-
Reported net profit	37,021	40,767	40,599	48,445	61,360	-	-
Recurring net profit	31,370	34,257	36,542	48,445	61,360	-	-
Basic EPS (HKD)	2.86	3.13	3.34	4.42	5.60	-	-
Core EPS (HKD)	1.531	1.596	1.750	1.561	1.750	-	-
DPS (HKD)	0.77	0.80	0.83	1.33	1.68	-	-
BVPS (HKD)	20.3	24.3	26.7	29.4	32.8	-	-

Peers Comparison

Peer	Stock code	Price (HKD)	Mkt cap (USDm)	3-mth avg t/o (USDm)	RHB/Cons (USDm)	Discount (%)	P/E (x)	EPS YoY change (%)	3-yr EPS CAGR (%)	P/BV (x)	Div yield (%)
Large peer average	-	-	34,125	37.1	25.4	20.2	1.7	1.4	5.1	6.2	-
China Vanke	2202 HK	25.95	36,639	33.1	33.34	22.2	7.2	24.7	20.3	1.6	5.0
Country Garden	2007 HK	12.06	33,319	111.5	26.70	54.8	6.6	5.0	32.5	1.9	5.2
Evergrande	3333 HK	28.85	47,913	101.6	42.20	31.6	8.4	7.0	19.8	2.4	7.5
China Overseas	688 HK	24.45	34,125	102.2	43.20	25.0	7.3	6.7	22.6	1.7	6.9

Key Risks

Relatively stretched landbank compared to peers
Possible earnings growth gap in FY18F due to slower-than-peers contracted sales growth
Dependence on contracted sales for earnings growth
Impact of market conditions on property sales and rental income
Interest rate fluctuations affecting financing costs
Economic downturns impacting real estate demand
Regulatory changes in the property sector
Competitive pressures from other large property developers