20140326-CIMB_SECURITIES_SNG_-Abundant_saleable_resources_and_YRD_region_sales_are_key_11页_666kb

Shimao Property Summary

Core Content

Shimao Property (813 HK) is a property developer with a strong financial position and promising growth prospects. The document outlines the company's FY13 results, sales targets for 2014, financial metrics, and analyst recommendations.

Key Financial Metrics

• Market Cap: US$6,518m (HK$50,561m)
• Avg Daily Turnover: US$17.10m (HK$132.7m)
• Free Float: 33,473,473 million shares
• Share Price: HK$14.56
• Target Price: HK$23.40
• Dividend Yield: 5.4%

FY13 Results

• Core Earnings: Rmb7.3bn, beating the consensus and the analyst's estimate.
• Gross Margin (GPM): 35.3%, up from 33.5% in FY12.
• Net Profit: Rmb7,389.9m, up 28.2% yoy.
• Core Net Profit: Rmb7,319.0m, up 66.8% yoy.
• EPS: Rmb213.3, up 28.3% yoy.
• Core EPS: Rmb211.2, up 66.9% yoy.
• Dividend Payout: 30% of net profit.
• Net Gearing: 57.4%, down from 57.9% in FY12.

Sales Outlook for 2014

• Contracted Sales Target: Rmb80bn, up 19% yoy.
• Saleable Resources: Rmb135bn, up 35% yoy.
• YRD Region Contribution: About 70% of total contracted sales.
• Saleable Resources Breakdown:
  • Mid-to-small units (below 140 sq m): 78% of total saleable resources.
  • Large units: 22% of total saleable resources.
• Sales Target by Quarters: Figure 2 shows the distribution of the sales target across the year.

Financial Performance Comparison

• Pretax Profit: Rmb13,058.8m in FY13, up 28.5% yoy.
• EBITDA: Rmb10,832.3m in FY13, up 58.8% yoy.
• EBITDA Margin: 26.1%, up from 23.8% in FY12.
• Core EPS Growth: 66.9% in FY14, with a target of Rmb2.85 in Dec-14F.
• FD Core P/E: 5.5x in CY2013, 4.1x in CY2014.
• EV/EBITDA: 7.67x in CY2013, 5.36x in CY2014.
• P/FCFE: 12.94x in CY2013, 12.57x in CY2014.
• Net Gearing: Expected to be around 50% in 2014 and 2015.
• ROE: 21.9% in 2014, up from 18.9% in 2013.

Analyst Recommendations

• Stock Rating: Add
• Analysts: Johnson HU, CFA and Linda LIN
• Contact: Johnson HU - T (852) 2532 1117, E johnson.hu@cimb.com; Linda LIN - T (852) 2539 1321, E linda.lin@cimb.com
• Target Price: HK$23.40, which is a 20% discount to RNAV (RMB/share: 23.24, HK$/share: 29.38)

Peer Comparison

• Core P/E: Shimao's CY2013 Core P/E is 5.5x, while the CY2014 Core P/E is 4.1x.
• RNAV Discount: Shimao is trading at a 50% discount to its RNAV.
• Dividend Yield: 5.4% in CY2013, with an expected increase in future years.

Sales and Inventory

• Unrecognised Contracted Sales: Rmb60bn as of 25 Mar 2014.
• Available for Booking: 75% of unrecognised contracted sales.
• Completed Inventory: 1m sq m or Rmb11.6bn as of Dec 2013.
• Inventory Clearance Strategy: Expected to impact margins but should be offset by price hikes in 2013.

Cash Flow and Balance Sheet

• Cash Flow from Operations: Rmb381m in Dec-13A, up to Rmb7,958m in Dec-16F.
• Capex: Rmb2,297m in Dec-13A, up to Rmb9,698m in Dec-16F.
• Debt Raised/Repaid: Rmb8,335m in Dec-13A, up to Rmb5,969m in Dec-16F.
• Dividends Paid: Rmb2,196m in Dec-13A, up to Rmb4,321m in Dec-16F.
• Total Equity: Rmb41,742m in Dec-13A, up to Rmb67,021m in Dec-16F.

Key Ratios

• Revenue Growth: 44.8% in FY13, 44.7% in FY14, 27.1% in FY15, 21.7% in FY16.
• Operating EBITDA Growth: 61.5% in FY13, 48.9% in FY14, 19.7% in FY15, 22.3% in FY16.
• Operating EBITDA Margin: 25.2% in FY13, 25.9% in FY14, 24.4% in FY15, 24.5% in FY16.
• Net Cash Per Share: Rmb-8.57 in Dec-13A, Rmb-9.20 in Dec-14F.
• BVPS: Rmb12.02 in Dec-13A, Rmb14.01 in Dec-14F.
• Gross Interest Cover: 33.50 in Dec-13A, 45.11 in Dec-14F.
• Effective Tax Rate: 37.0% in Dec-13A, 37.3% in Dec-14F.
• Net Dividend Payout Ratio: 29.7% in Dec-13A, 30.0% in Dec-14F.

Key Points

• Shimao's FY13 results are encouraging with core earnings beating estimates and a healthy margin improvement.
• The company is targeting Rmb80bn in contracted sales for 2014, supported by increased saleable resources.
• The YRD region is a key market for Shimao, but concerns over the local economy and price cuts may affect sentiment.
• Mid-to-small units are expected to be more resilient in the property market slowdown.
• Shimao is maintaining its GPM at 35% in FY14 despite potential margin pressure from inventory clearance.
• The net gearing is expected to decrease slightly to 50% by end-2014, with a focus on prudent land banking.
• The company's RNAV is estimated at HK$29.38 per share, with a target price that is a 20% discount.
• Shimao is outperforming its peers in terms of financial metrics and is recommended as an "Add" by CIMB analysts.