20180313-兴业金融证券-雅居乐集团-03383.HK-Signs_To_Drive_a_Re-Rating_12页_457kb

Agile Group Holdings Summary

Core Content

Agile Group Holdings, a property developer with over 20 years of experience, is entering a new growth phase with strong financial performance and strategic positioning. The company reported a significant net profit increase of 150% YoY, surpassing both the analysts' forecast and consensus estimates by 28% and 25% respectively. This positive profit alert, announced on 12 March 2018, is attributed to higher revenue bookings and wider gross profit margins (GPMs). The firm also demonstrated strong contracted sales performance of 12% YoY in the off-season during the Lunar New Year, reinforcing its growth momentum.

Main Points

• Profit Alert: Agile reported a 150% YoY increase in net profit, beating expectations.
• New Target Price: The target price was updated to HKD18.00, reflecting a 40% discount to its end-FY18F ENAV of HKD30.00.
• GPM Recovery: GPM is expected to rebound, with estimates at 34.5%, 33.4%, and 33.1% for FY17F, FY18F, and FY19F respectively.
• Contracted Sales Growth: Agile anticipates a 34.5% and 30.3% YoY growth in contracted sales for FY18 and FY19 respectively, driven by strong property markets in Hainan and the Greater Bay Area.
• Dividend Strategy: The company is expected to maintain a 40% dividend payout ratio, with a potential special dividend to support share price re-rating.
• Deleveraging: Net gearing is projected to decline to 70.2% and 63.5% in FY18 and FY19 respectively, indicating a more stable financial position.

Key Information

• Financial Forecast: Agile's recurring net profit is expected to increase significantly, from CNY4.4bn in FY17F to CNY5.6bn, and further to CNY8.9bn in FY19F.
• Earnings Growth: The company's earnings growth forecasts for FY17-19 are 103%, 31%, and 22% YoY, outperforming the consensus estimates of 66%, 21%, and 15% respectively.
• Valuation Metrics:
  • Recurring P/E: 19.0 (Dec-15), 16.9 (Dec-16), 8.4 (Dec-17F), 6.4 (Dec-18F), 5.3 (Dec-19F)
  • P/B: 1.36 (Dec-15), 1.32 (Dec-16), 1.12 (Dec-17F), 1.02 (Dec-18F), 0.92 (Dec-19F)
  • Dividend Yield: 2.7% (Dec-15), 3.4% (Dec-16), 4.8% (Dec-17F), 6.2% (Dec-18F), 7.5% (Dec-19F)
• Share Performance:
  • Absolute: 24.3% (YTD), 31.8% (1m), 29.1% (3m), 32.8% (6m), 145.3% (12m)
  • Relative: 20.7% (YTD), 26.6% (1m), 21.5% (3m), 22.0% (6m), 113.8% (12m)
• Market Cap: USD7,366m
• Analysts: Toni Ho, CFA and Angelo Wong
• Share Data:
  • Avg Daily Turnover: HKD120m/USD15.3m
  • 52-wk Price Range: 6.07 - 14.8
  • Free Float: 37%
  • Shares Outstanding: 3,917m

Key Drivers

• Recovery in GPM and Contracted Sales: Strong performance in low-tier cities and contracted sales growth in FY18-19.
• Strategic Expansion: Expansion into Hainan and the Greater Bay Area, and a landbank with a total GFA of 31.6m sqm.
• Operational Efficiency: Improved asset turnover and reduced capital expenditure as a percentage of sales.

Key Risks

• Slow Asset Turnover: Potential for slower-than-expected sales realization.
• Over-reliance on Tier-3 Cities: High exposure to smaller cities may pose risks if market conditions change.

Peer Comparison

Agile is compared with major and mid-sized peers in the real estate sector, including Evergrande, China Overseas, China Vanke, and others. The company's metrics, such as P/E, P/B, and dividend yield, are in line with or better than the sector average. Agile's target price of HKD18.00 is aligned with the sector's long-term average discount of 40% to ENAV.

Conclusion

Agile Group Holdings is recommended to maintain a "Buy" rating, with a new target price of HKD18.00, based on a 40% discount to its end-FY18F ENAV of HKD30.00. The firm is expected to deliver strong growth in both contracted sales and earnings over the next two financial years, supported by its improved financial metrics and strategic focus on key regions. The potential for a special dividend and improved profit margins further support the re-rating of its share price.