20140407-大和证券-Shui_On_Land_Clear_horizons_15页_554kb
报告摘要
Shui On Land Summary
Core Content
Shui On Land is a property development company established in 2004 and listed on the Hong Kong Stock Exchange in 2006. It is a flagship company of Shui On Group, operating primarily in China, with eight high-end projects in five cities: Shanghai, Wuhan, Chongqing, Foshan, and Dalian. The company is focused on improving its financial performance and achieving sustainable growth through various strategic initiatives.
Main Goals and Outlook
The company has outlined four key goals for the 2014-2015 period:
- Refinancing bonds due in 2015 (CNY10.7bn)
- Obtaining cleared land in Shanghai
- Achieving CNY5bn or more in en-bloc sales in 2014
- Listing China Xintiandi (CXTD) by the end of 2015
These goals are expected to improve the company's cash flow and earnings capacity. The company's share price is anticipated to benefit from positive news flow related to these initiatives.
Key Financial Highlights
- Target Price (HKD): 3.05 → 2.85
- Upside: 27.2%
- 7 Apr 2014 price (HKD): 2.24
- Market Cap (USD bn): 2.31
- 3m avg daily turnover (USDm): 2.36
- Shares Outstanding (m): 8,002
- Major Shareholder: Vincent Lo (57.2%)
Financial Summary (CNY)
| Year to 31 Dec | 2014E | 2015E | 2016E |
|---|---|---|---|
| Revenue (m) | 12,109 | 12,949 | 19,561 |
| Operating Profit (m) | 2,567 | 2,797 | 5,157 |
| Net Profit (m) | 1,132 | 1,491 | 2,243 |
| Core EPS (fully-diluted) | 0.139 | 0.183 | 0.280 |
| EPS change (%) | 22.1 | 31.7 | 52.9 |
| Daiwa vs Cons. EPS (%) | -19.5 | 1.3 | 29.2 |
| PER (x) | 12.9 | 9.8 | 6.4 |
| Dividend Yield (%) | 2.6 | 2.8 | 2.8 |
| DPS | 0.048 | 0.050 | 0.050 |
| PBR (x) | 0.4 | 0.4 | 0.3 |
| EV/EBITDA (x) | 13.3 | 11.7 | 7.0 |
| ROE (%) | 3.1 | 3.9 | 5.5 |
Forecast Revisions
| Year | Revenue Change (%) | Net Profit Change (%) | Core EPS Change (%) |
|---|---|---|---|
| 2014 | -13.6 | -29.8 | -30.9 |
| 2015 | -8.7 | -17.6 | -18.9 |
Key Assumptions and Performance
| Year to 31 Dec | 2009 | 2010 | 2011 | 2012 | 2013 | 2014E | 2015E | 2016E |
|---|---|---|---|---|---|---|---|---|
| General Contracted Sales (CNY m) | 6,486 | 4,976 | 5,872 | 5,562 | 9,901 | 8,144 | 15,208 | 14,184 |
| Contracted En-bloc Sales (CNY m) | 0 | 0 | 4,795 | 170 | 6,712 | 5,000 | 6,000 | 3,000 |
| Recognized Property Sales (CNY m) | 6,078 | 4,133 | 7,581 | 3,541 | 8,361 | 10,034 | 10,041 | 15,749 |
| Rental and Other Recurring Income (CNY m) | 542 | 597 | 744 | 952 | 1,048 | 1,564 | 2,225 | 3,049 |
| Gross Profit Margin (%) | 50 | 36 | 41 | 38 | 27 | 25 | 24 | 28 |
Key Risks
- Weak 2014 contract sales
- Disappointing refinancing exercise
- Acquisition of new projects that may pressure the balance sheet
Progress Toward Goals
- Household relocation for key projects in Shanghai is progressing. One plot was cleared in 2013, and the rest are expected to be completed by mid-2014.
- The company has already paid CNY9.6bn for the relocation of these plots by the end of 2013.
- The relocation of two additional plots in the RHXC project was completed in 2013, with 94% of the work done.
- These plots are expected to be cleared by 2015.
Financing and Cost Reduction
- In November 2013, Shui On Land secured CNY10bn in policy loans from 5 syndicated banks at a lower rate (6-7%) than previous bonds.
- This should reduce borrowing costs and ease refinancing pressure.
En-bloc Sales
- The company has been actively selling commercial properties since 2011, with CNY6bn in en-bloc sales in 2013, exceeding the target of CNY4bn.
- For 2014, the target is CNY5bn, indicating a positive trend in asset turnover and a move toward reducing investment in commercial properties.
2013 Financial Performance
- Revenue: Increased by 103.9% to CNY9.8bn
- Gross Profit: Increased by 53.2% to CNY3.155bn
- Pre-tax Profit: Increased by 28.5% to CNY4.777bn
- Net Profit: Increased by 4.7% to CNY2.125bn
- Core Net Profit to Ordinary Shareholders: Increased by 332.3% to CNY869m
- Diluted EPS Excl Valuation Gain: Increased by 303.8% to CNY0.11
Gearing and Debt
- Net Gearing: 71% at the end of 2013, down from 80% in 2012
- The company is expected to increase gearing in 2014 but keep it under control at 70%.
- The company has issued a CNY2.5bn bond and secured CNY10bn in syndication loans for relocation.
Free Cash Flow
- Free Cash Flow (2016E): Expected to be CNY7,744m, indicating a significant improvement in the coming years.
Conclusion
Shui On Land is on a path to improve its financial performance through strategic initiatives such as refinancing, clearing land in Shanghai, and increasing en-bloc sales. Despite a lower-than-expected gross profit margin in 2013, the company is showing progress in its operational efficiency and asset management. The reiteration of a "Buy" recommendation reflects confidence in the company's ability to achieve its goals and unlock value for investors.
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