20180205-高盛-信和置业-00083.HK-Unloved_and_forgotten,_but_positive_catalysts_for_2018__up_to_Buy_14页_562kb

Sino Land (0083.HK) Summary

Core Content

Sino Land (0083.HK) has been underperforming its sector benchmark, particularly the FTSE EPRA/NAREIT Hong Kong index, by 13 basis points since end-2016. Despite a 28% increase in share price during the same period, the stock remains 45% below its 10-year peak. The underperformance is attributed to relatively muted sales and land banking efforts, which have been a key factor in its weaker performance.

Key Catalysts for 2018

• Substantial Earnings Growth: The company is expected to report significant growth in earnings due to recognition of disposal gains, a key new project launch in Hong Kong, and active asset recycling efforts in late 2017.
• New Project Launch: The Kwun Tong Town Center redevelopment project, with 2,000 units and an attributable HK$26bn value, is anticipated to be launched in 2H2018E. At prevailing sales prices, this project is estimated to achieve a gross margin of close to 40%.
• Asset Recycling: Sino Land has effectively swapped its Chinese tier-2 city exposure for Hong Kong prime land banking, resulting in a HK$11bn disposal of its Chengdu project stake, which has contributed to improved financial flexibility and balance sheet strength.
• Capital Management Potential: With HK$26bn of attributable net cash, the company has the capacity to consider capital management strategies such as a special dividend, faster DPS growth, or share buybacks.

Financial Overview

• Market Cap: HK$83.9bn / $10.7bn
• Enterprise Value: HK$72.4bn / $9.3bn
• 3m ADTV: HK$62.0mn / $7.9mn

Earnings Forecasts

Valuation Metrics

• 12m Price Target: HK$16.90 (up from HK$15.05)
• Current Price: HK$14.10
• Upside: 19.9%
• Discount to NAV: 39% (based on FY19E)
• PBR: 0.72X
• Dividend Yield (FY18E): 3.6%

Balance Sheet Highlights

• Net Debt (adjusted): HK$-27,221.3m (6/17) to HK$-18,625.2m (6/20E)
• Total Attributable Net Cash: HK$26bn (equivalent to 17%–28% of FY19E NAV)
• Total Liabilities: HK$25,940.8m (6/17) to HK$18,311.5m (6/20E)
• Total Common Equity: HK$128,353.8m (6/17) to HK$129,106.9m (6/20E)

Key Projects and Development Pipeline

Key Insights

• Sino Land's share price has underperformed the sector by 14pp since end-2016.
• The company's development pipeline in Hong Kong has been replenished, with a significant number of unsold residential units increasing from c.3,500 to c.4,700 in 2017.
• The company's retail investment properties account for 34% of its NAV, one of the highest among its peers, and are expected to support DPS growth.
• The company is expected to generate record profits in 2018, primarily due to gains from the sale of China projects.
• Goldman Sachs has upgraded its rating from Neutral to Buy, citing the positive catalysts and valuation discount.

Analysts

• Justin Kwok, CFA: +852-2978-0481 | justin.kwok@gs.com
• Colin Yao: +65-6654-5426 | colin.yao@gs.com

Disclaimer

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.