20140218-DBS_Group-China_Property_Weekly_Digest_42页_926kb

China Property Weekly Digest Summary (Issue No. 65)

Core Content

This report provides an overview of the Chinese property market, focusing on policy updates, sales performance, and company developments. It highlights the performance of specific projects, the impact of recent policy changes, and the valuation status of the sector.

Main Points

Project of the Week: CR Land - Taihu International Community (Wuxi)

• Location: Wuxi, near the city center in the new CBD.
• Unit Types: High-rise and low-rise units.
• Unit Sizes: Ranging from 179 to 280 square meters (sm).
• ASP (Average Selling Price):
  • Apartments: Rmb13,000/sm
  • Low-rise units: Rmb20,000/sm
• Sales Performance:
  • 2013: Rmb800m sold out of Rmb850m launched.
  • 2014: Target of Rmb650m sales with Rmb700m saleable resources.
• Margins:
  • Gross margin: 52%
  • Net margin: 24%
• Developer: CR Land (1109.HK).

Policy Update

• Suzhou Commercial Property Restrictions:
  • Developers must hold a certain proportion of newly-developed commercial properties for three years before selling.
  • For GFA under 100k sm: 1/3 of GFA must be held.
  • For GFA over 100k sm: 30k sm must be held.
• Other Cities' Policies:
  • Chongqing: Adjusted HPF mortgage policy with revised downpayment and mortgage caps.
  • Qingdao: Adjusted HPF mortgage policy with extended payment period and joint application requirements.
  • Kunming: Tightened HPF policies, including higher downpayments and a two-year "window period" for new HPF mortgages.
  • Wenzhou: Increased HPF mortgage and rental subsidy caps for professional talents.
  • Guangxi: Increased transaction tax on second-hand properties to 6.6% regardless of ownership period.
  • Chongqing: Raised property tax threshold for high-end housing by 3%.
  • Xiangyang, Hubei: Adjusted HPF policies with revised downpayment requirements and eligibility for graduates.
  • Cixi, Zhejiang: Lowered HPF mortgage cap.
  • Beijing: Adjusted property gains tax and land supply plan.

Weekly Sales Performance

• Tier I Cities:
  • Sales Volume: Increased significantly (1,363% w-o-w) from the low base of CNY week.
  • ASP: Increased by 8% w-o-w in Tier I cities, but decreased by 3%/4% in Tier II/III cities.
  • YTD Sales:
    • Tier I: Down 40% y-o-y.
    • Tier III: Down 4% y-o-y.
    • Tier II: Up 3% y-o-y.
• Tier II Cities:
  • Sales Volume: Increased by 284% w-o-w.
  • ASP: Generally down by 3% w-o-w.
  • YTD Sales:
    • Tier II: Up 3% y-o-y.
• Tier III Cities:
  • Sales Volume: Increased by 255% w-o-w.
  • ASP: Generally down by 1% w-o-w.
  • YTD Sales:
    • Tier III: Down 4% y-o-y.

Inventory Level

• Inventory (000 sm):
  • Beijing: 6,990
  • Shanghai: 10,006
  • Shenzhen: 3,234
  • Guangzhou: 7,325
  • Hangzhou: 7,086
  • Suzhou: 6,789
  • Ningbo: 11,167
  • Qingdao: 14,972
  • Nanjing: 4,367
  • Fuzhou: 3,051
  • Huizhou: 2,229
  • Jiujiang: 1,894
  • Nanchong: 4,332
  • Zhoushan: 1,804
  • Dongying: 3,329
• Average Weeks to Digest Inventory: 133 weeks.

Valuation and Investment Outlook

• Sector Valuation:
  • FY14F PE: 5.6x
  • P/BV: 0.8x
  • Discount to NAV: 56%
• Investment Recommendations:
  • Suggest accumulating big caps with strong fundamentals and good track records, such as COLI.
  • Shimao and Country Garden are recommended for their presales growth outlook.
  • Franshion’s spin-off of hotel assets could be a near-term catalyst.
  • COGO is noted as a good value stock.

Key Information

• HSI (Hang Seng Index): 22,588.

• Analysts:

  • Andy YEE: +852 2971 1773, andy_yee@hk.dbsvickers.com
  • Ken HE CFA: +86 21 6888 3375, ken—he@hk.dbsvickers.com
  • Carol WU: +852 2863 8841, carol_wu@hk.dbsvickers.com
  • Danielle WANG CFA: +852 2820 4915, danielle_wang@hk.dbsvickers.com

• Recent Reports:

  • China Overseas - Making A Good Start To Acquisitions - 12 Feb
  • BJ Capital Land - Fuelled Growth Ahead - 12 Feb
  • China Property Sector - How Liquidity Affects Property Sales? - 14 Feb
  • China Property Sector - A Year To Gain Market Share - 17 Feb

Summary

The report highlights the mixed performance of the property market across different tiers, the recent tightening of commercial property policies in Suzhou, and the overall valuation discount in the sector. It also provides specific insights into the performance of CR Land's project in Wuxi and other major developers' land acquisitions. Investment opportunities are suggested for stocks with strong fundamentals and good growth prospects.