20130903-DBS_Group-Greenland__Hong_Kong__Hong_Kong_NDR_takeaway__New_leadership_to_spur_growth_12页_273kb

Greenland (Hong Kong) Summary Report

Core Content

This report provides an analysis of Greenland (Hong Kong) (337 HK), focusing on its potential for growth, current financial performance, and valuation. The report highlights the impact of new leadership, asset injection plans, and the company's strategic initiatives to enhance its market position in the Chinese property development sector.

Main Points

• Recommendation: BUY with a 12-month price target of HK$8.79.
• Price Target: Based on a 3.3x fully diluted P/BV.
• New Leadership: The new management team, including the new chairman Chen Jun, has strong execution capability and aims to grow the company at a high speed.
• Growth Strategy:
  • Inject high-quality projects into Greenland Hong Kong, with a focus on regions such as Yangtze River Delta, Fujian, Guangdong, Guangxi, Yunnan, and Hainan.
  • Target Rmb50bn contracted sales by 2018.
  • Implement the Group's sales and marketing system, budgeting system, product line, and fast asset turnover model.
• Asset Injection: Expected to reach Rmb7bn in terms of equity. No premium is expected for the asset injection, and the company will pay it in cash.
• Project Revival: Reviving existing projects in Huangshan and Wuxi Xishuidong has seen strong market responses and improving sales.
• Management Style: Aggressive in growth but lacks capital market experience. The report suggests that SPG's financial expertise could complement this.
• Potential JVs: Greenland Hong Kong could form joint ventures with regional companies to expand beyond designated regions, supporting foreign investment in certain local governments' goals.
• Financial Performance:
  • EPS (HK$): Expected to grow from 0.20 (2013F) to 1.01 (2015F).
  • P/E Ratio: Expected to decline from 33.6 (2013F) to 6.7 (2015F).
  • P/Cash Flow: Expected to drop from 3.0 (2013F) to 1.3 (2015F).
  • EV/EBITDA: Expected to decrease from 7.4 (2013F) to 3.1 (2015F).
  • ROE: Expected to increase from 8.1 (2013F) to 26.0 (2015F).
• Net Gearing: Expected to remain around 73.4% (2015F).
• Book Value: Expected to increase from HK$2.89 (2012A) to HK$4.37 (2015F).
• P/Book Value: Expected to decrease from 2.3 (2012A) to 1.5 (2015F).
• Market Concerns: The potential acquisition of A-share listco remains a concern for investors, although management claims it won't affect support for Greenland Hong Kong.
• Valuation Support: The current NAV per share is HK$3.72, and the company could potentially acquire Rmb7bn worth of projects to boost its valuation.

Key Information

• Issued Capital: 1,142 million shares.
• Market Cap (HK$): 7,619 million.
• Major Shareholders: Wang Weixian holds 70.7%, with a free float of 29.3%.
• Average Daily Volume: 4.1 million shares.
• Valuation Comparison:
  • Tier 1 Players: Includes companies like China Overseas, Country Garden, CR Land, Evergrande, Shimao Property, and Sino-Ocean Land.
  • Tier 2 Players: Includes Agile Property, COGO, Franshion, Greentown, Guangzhou R&F, and Yuexiu Property.
  • Tier 3 Players: Includes BJ Cap Land, BJ North Star, C C Land, and Central China.
• Profit Sharing Culture: Management is considering implementing a profit sharing scheme for employees.
• Gross Margin and ROE: Both are 30% for the Group.
• Bank Facilities: The Group has Rmb100bn in bank facilities, with Rmb70bn drawn down.
• Interest Cost: Typically at PBOC + 9%.
• Trust Loans: Available at ~8%.
• Net Debt Ratio: Approximately 100%.
• Valuation Discount: The average discount to NAV is ~31%.

Conclusion

Despite concerns over the potential A-share listco acquisition, the report maintains a BUY recommendation for Greenland (Hong Kong), citing the strong execution capability of the new management team and the strategic asset injection plan. The company's growth targets and improved financial metrics are expected to support its valuation. The report also emphasizes the importance of valuation support through NAV enhancement and project acquisition.