20151116-招商证券_香港_-禹洲地产-01628.HK-Sales_to_surprise_in_Nov-Dec._Valuation_attractive_12页_2mb_2mb

Yuzhou Properties (1628 HK) Summary

Core Content

Yuzhou Properties (1628 HK) is a property developer that has demonstrated strong performance in key markets such as Xiamen and Hefei. The company's focus on selected cities and its strategy to maintain steady sales and profit growth are central to its current valuation and investment outlook.

Main Points

• Sales Performance:

  • Yuzhou's mass-end residential products have shown strong demand, with a take-up rate of 60-70% in the first-month launch.
  • In November, sales were particularly buoyant, with the company ranked no. 1 in Xiamen and top 5 in Hefei.
  • Over 80% of buyers are first-time or home-upgrade buyers, indicating a strong market presence.
  • The cash collection rate is above 80%, attributed to smooth mortgage processes.
  • The new sales launch is expected to boost contracted sales to RMB1.5-2bn per month in Nov/Dec, leading to a full-year forecast of RMB13bn or +8% YoY, which is higher than its peers' average of 4%.

• Sales Growth in 2016:

  • Management expects the property market to remain buoyant in 2016.
  • The company targets RMB5bn from Xiamen and RMB4bn from Hefei, with Nanjing, Shanghai, and Hong Kong as potential growth drivers.
  • Estimated contracted sales for 2016E are RMB14.5bn, representing a +11.5% YoY increase.
  • The ASP (average selling price) is expected to increase by 5% YoY, due to balanced supply/demand and smooth mortgage processes.

• Strategic Focus:

  • Yuzhou is actively seeking development opportunities in large cities like Beijing and Shanghai.
  • The company aims to maintain a net gearing of 60-80%, indicating a controlled leverage strategy.

• Valuation and Dividend Policy:

  • The stock is considered attractive with a 67% discount to NAV, 0.6x P/B, and a 9% yield.
  • The yield is higher than its peers' 5-6%, suggesting a generous dividend policy.
  • The 12-month target price is HK$2.4, indicating a potential upside of 24% from the previous price of HK$1.94.

• Financial Highlights:

  • Revenue Growth: From 92% in 2013 to 30% in 2017E.
  • Core Net Profit Growth: From 35% in 2013 to 20% in 2017E.
  • Core EPS: Expected to increase from 0.38 in 2013 to 0.55 in 2017E.
  • Net Gearing: Expected to decrease from 78% in 2013 to 58% in 2017E.
  • P/E Ratio: From 5.0x in 2013 to 3.4x in 2017E.
  • P/B Ratio: From 0.7x in 2013 to 0.5x in 2017E.
  • Dividend Yield: Expected to increase from 7.8% in 2013 to 10.3% in 2017E.

Key Projects

Xiamen Projects

• Xiamen Yuzhou LUcca Town:

  • GFA: 136k sqm (unbooked).
  • ASP: RMB16,000-18,000 psm for high-rise; RMB26,000 psm for villa.
  • Estimated contracted sales in 2015/16E: RMB600mn/700mn.
  • Land cost: RMB12,000 psm.
  • Estimated completion: 2016.
  • Located in Xiang'an District, with good transportation and development potential.

• Xiamen Yuzhou Central Coast:

  • GFA: 615k sqm (mostly sold).
  • ASP: RMB22,000 psm (bare-shell); RMB24,000 psm (renovated).
  • Estimated contracted sales in 2015/16E: RMB1.5bn/0.5bn.
  • Land cost: RMB2,500 psm.
  • Estimated completion: 2015 year-end.
  • Located in Jimei District, with access to established facilities and a scenic coastline.

Hefei Projects

• Hefei Yuzhou Central Town:

  • GFA: 341k sqm (unbooked).
  • ASP: RMB8,500-8,600 psm.
  • Estimated contracted sales in 2015/16E: RMB0.5bn/1.0bn.
  • Land cost: RMB4,300 psm.
  • Estimated completion: Nov. 2017.
  • Located near the train station, with good infrastructure and transportation.

• Hefei Yuzhou Jade Lakeshire:

  • GFA: 288k sqm (unbooked).
  • ASP: RMB7,300 psm.
  • Estimated contracted sales in 2015/16E: RMB800mn/500mn.
  • Land cost: RMB1,800 psm.
  • Estimated completion: 2015/2016.
  • Located near Jade Lake, with good access to educational and commercial areas.

• Hefei Yuzhou Central Plaza:

  • GFA: 919k sqm (saleable).
  • ASP: RMB6,300 psm for high-rise; RMB12,000-18,000 psm for shopping arcade.
  • Estimated contracted sales in 2015/16E: RMB1.1bn/1.2bn.
  • Land cost: RMB1,400 psm.
  • Estimated completion: Nov. 2016 (phase I).
  • Located in Feidong District, with good access to city center and a variety of residential and commercial units.

Valuation Comparison

• Discount to NAV: Yuzhou is currently trading at 67% discount to its estimated end-FY15E NAV of HK$5.9/share.
• Peer Comparison:
  • The average discount to NAV for large peers is 26.6%.
  • The average discount for mid-and-small peers is 49.4%.
  • Yuzhou's valuation is more attractive compared to the industry average, especially for mid-and-small peers.

Financial Summary

• Balance Sheet:

  • Total assets are projected to grow from RMB27,361 mn in 2013 to RMB53,354 mn in 2017E.
  • Shareholders' equity is expected to increase from RMB7,361 mn in 2013 to RMB11,870 mn in 2017E.
  • Total liabilities are projected to grow from RMB19,890 mn in 2013 to RMB40,129 mn in 2017E.

• Cashflow Statement:

  • Operating cashflow is projected to fluctuate, with a peak of RMB5,217 mn in 2015E.
  • Investing cashflow is negative in 2015E and 2016E, indicating ongoing land purchases.
  • Financing cashflow is positive in 2015E and 2016E, reflecting a combination of loan increases and dividend payouts.

• Profit & Loss Statement:

  • Gross revenue is projected to grow from RMB7,471 mn in 2013 to RMB12,800 mn in 2017E.
  • Cost of goods sold is expected to increase from RMB5,152 mn in 2013 to RMB9,183 mn in 2017E.
  • Pre-tax profit is projected to increase from RMB2,463 mn in 2013 to RMB2,938 mn in 2017E.
  • Reported net profit is expected to increase from RMB1,472 mn in 2013 to RMB1,739 mn in 2017E.

Ratios

• Growth:

  • Revenue growth is projected to increase from 92% in 2013 to 30% in 2017E.
  • Gross profit growth is expected to decrease from 50% in 2013 to 33% in 2017E.
  • Core net profit growth is projected to increase from 35% in 2013 to 20% in 2017E.

• Profitability:

  • Gross margin is expected to range from 31% in 2013 to 28% in 2017E.
  • Core net profit margin is expected to remain stable at 15% in 2015E to 2017E.
  • Effective tax rate is projected to decrease from 49% in 2014 to 39% in 2017E.
  • ROE (Return on Equity) is expected to range from 16% in 2013 to 15% in 2017E.
  • ROA (Return on Assets) is expected to remain stable at 3% in 2015E to 2017E.
  • Dividend Pay Out ratio is expected to increase from 28% in 2013 to 37% in 2017E.

• Liquidity:

  • Free cashflow is projected to fluctuate, with a positive trend in 2017E.
  • Total Debt - Total Equity Ratio is expected to decrease from 130% in 2013 to 147% in 2017E.
  • Net Debt - Total Equity Ratio is expected to decrease from 78% in 2013 to 58% in 2017E.
  • Interest Coverage is expected to decrease from 2.2 in 2013 to 2.0 in 2017E.

Investment Ratings

• Industry Rating: OVERWEIGHT, indicating the sector is expected to outperform the market.
• Company Rating: BUY, indicating the stock is expected to generate a 10%+ return over the next 12 months.

Conclusion

Yuzhou Properties (1628 HK) is a property developer with strong sales performance in key cities, a controlled leverage strategy, and an attractive valuation. The company is expected to maintain a steady growth trajectory in sales and profits, supported by its strategic focus on selected markets and a robust dividend policy. The current valuation, with a significant discount to NAV and a high yield, makes it an attractive investment opportunity.