20181113-信达国际控股-中国奥园-03883.HK-Strong_contract_sales_with_stable_profitability_5页_438kb

Aoyuan Summary

Core Content

Aoyuan is a property developer with a strong focus on the Greater Bay Area (GBA) and has demonstrated robust contract sales performance. The company's contract sales reached RMB20.8bn in 3Q18, representing a 124% year-over-year (yoy) increase. By the end of October 2018, Aoyuan had achieved 93% of its FY18E contract sales target, outperforming its peers who had an average of 88% of their full-year target. This indicates a solid grasp of the sales pace and the potential to exceed the FY18E target of RMB73bn.

Key Financial Highlights

• Contract Sales:
  • 3Q18: RMB20.8bn (+124% yoy)
  • 1H18: RMB40.29bn (achieved 50% of FY18E target)
  • Full-year target for FY18E: RMB73bn
• Cash Collection:
  • 80% of FY18E contract sales (RMB32.2bn) were collected in 1H18, showing a rapid cash collection cycle.
• Land Bank:
  • 30mn sqm of saleable resources with a total value of RMB327.5bn
  • 50% of cash collected is allocated to land bank for future development
  • By end of 2018, approximately 50% of land bank will be located in South China (including GBA), with the remaining distributed across other regions.

Profitability and Margin

• Revenue: RMB13.7bn in 1H18 (+68% yoy)
• Core Net Profit: RMB1.39bn (+67% yoy)
• Gross Profit Margin (GPM): Expanded by 170 bps to 28.6%
• Core Net Profit Margin: Maintained at 10.2%
• Profit Distribution:
  • 83% of profit attributable to shareholders
  • 17% to minority shareholders

Financing and Debt

• Net Gearing Ratio: 51% in FY17, significantly lower than the industry average of ~79%
• Borrowing Costs:
  • Declined from 11.4% in FY13 to 7.3% in 1H18
  • Expected to remain stable
• Debt Breakdown:
  • Senior notes and bonds shareholders of subsidiaries: RMB8.924bn in 1H18
  • Total liabilities: RMB98.68bn in FY17

Valuation and Market Position

• Trading at FY18E 4.5x PE / 0.9x PB, which is 40% discount to NAV compared to peers
• Dividend Yield: 8.4% for FY18E, higher than peers' average of 8.0%
• Peer Comparison:
  • Aoyuan's P/E ratio is lower than the average of its GBA-focused peers
  • Aoyuan's P/B ratio is similar to peers, but its discount to NAV is more significant

Strategic Focus

• Aoyuan has expanded its presence to 80 cities, with a strong focus on the GBA region
• The company has achieved full coverage of the "9+2" cities in the GBA
• The opening of the Hong Kong-Zhuhai-Macau Bridge is expected to enhance synergies among GBA cities, driving property demand in the medium term

Risk and Outlook

• The report advises investors to monitor the pace of contract sales and land bank acquisition, as there may be potential slowdowns in the remaining months of FY18E and FY19E
• The company's profitability is expected to remain stable, supported by its strong cash collection and strategic land bank management

Additional Information

• Founded: 1996
• Listing: Hong Kong Stock Exchange (HKSE), 9 October 2007
• Major Shareholders: Guo Zi Wen and Guo Zi Ning (54.1%)
• Auditors: Deloitte
• Market Cap: HK$12,496.1m
• Major Shareholders: Guo Zi Wen and Guo Zi Ning (54.1%)
• Dividend Yield: 8.4% for FY18E
• Trading Data:
  • 52-Week Range: HK$7.90/HK$3.67
  • 3-Month Average Daily Volume: 11.5m shares

Financial Statements (Selected)

Income Statement (1H18)

• Turnover: RMB13.666.6bn (+67.6% yoy)
• Gross Profit: RMB3.902.1bn (+78.1% yoy)
• Gross Profit Margin: 28.6% (+170 bps)
• Net Profit: RMB1.474.8bn (+71.8% yoy)
• Core Net Profit: RMB1.392.3bn (+67.3% yoy)
• Core Net Profit Margin: 10.2% (unchanged)
• Basic Earnings Per Share (RMB cents): 45.4 (+61.5% yoy)

Balance Sheet (FY17)

• Total Assets: RMB125.806bn
• Total Liabilities: RMB98.68bn
• Shareholders' Equity: RMB27.126bn
• Bank and Other Borrowings: RMB14.423bn
• Senior Notes and Bonds: RMB7.118bn
• Net Cash (Debt): RMB-15.322bn

Analysts and Rating Policy

• Analysts: Hayman Chiu, Lewis Pang, Kenneth Li, Farica Li, Leanna Xiao, Chloe Chan, Edith Li
• Rating Policy:
  • Stock Rating: Buy (outperform HSI by 15%), Neutral (between -15% ~ 15% of HSI), Sell (underperform HSI by -15%)
  • Sector Rating: Accumulate (outperform HSI by 10%), Neutral (between -10% ~ 10% of HSI), Reduce (underperform HSI by -10%)

Disclaimer

This report is prepared by Cinda International Research Limited. The information and opinions are based on sources believed to be reliable but are not guaranteed for accuracy or completeness. The report is for informational purposes only and does not constitute an offer to buy or sell securities. Cinda International will not be liable for any loss arising from the use of this report.