20140822-DBS_Group-Recovering_marketsentiment_in_Zhengzhou_16页_444kb

报告摘要

Central China Real Estate Summary

Core Content

Central China Real Estate is a real estate holding and development company operating primarily in China, with a focus on property development. The report, issued by DBS Group Research on 22 August 2014, provides an analysis of the company's financial performance, valuation, and market outlook. It also includes comparisons with other real estate companies in the Hong Kong market.

Main Points

Company Update and Recommendation

Recommendation: BUY
Price Target: HK$2.44
Reason for Report: Company update
Potential Catalyst: Sales pick up
Earnings Estimate vs Consensus: The company's earnings estimates are lower than the consensus.

Analysts

Andy YEE: +852 2971 1773 | andy_yee@hk.dbsvickers.com
Danielle WANG CFA: +852 2820 4915 | danielle_wang@hk.dbsvickers.com
Carol WU: +852 2863 8841 | carol_wu@hk.dbsvickers.com
Ken HE CFA: +86 21 6888 3375 | ken_he@hk.dbsvickers.com

Financial Highlights (FY Dec)

Metric	2013A	2014F	2015F	2016F
Turnover (RMB m)	6,951	12,506	14,814	16,738
EBITDA (RMB m)	2,740	2,966	3,464	3,964
Pretax Profit (RMB m)	1,939	2,884	3,363	3,686
Net Profit (RMB m)	1,026	1,009	1,159	1,475
Core Profit (RMB m)	1,026	1,009	1,159	1,475
EPS (RMB)	0.42	0.41	0.48	0.61
EPS (HK$)	0.53	0.52	0.60	0.77
EPS Growth (%)	24.4	(1.6)	14.8	27.3
PE (x)	4.1	4.2	3.6	2.9
P/Cash Flow (x)	17.2	1.4	1.2	0.9
EV/EBITDA (x)	2.7	2.9	3.0	2.8
DPS (HK$)	0.16	0.16	0.18	0.23
Dividend Yield (%)	7.3	7.2	8.2	10.5
Net Gearing (%)	37.2	45.4	52.9	52.2
ROE (%)	18.3	15.8	16.2	18.3
Book Value (HK$)	3.12	3.49	3.91	4.45
P/Book Value (x)	0.7	0.6	0.6	0.5
Earnings Rev (%)	-	(11.0)	(20.0)	New
Consensus EPS (RMB)	-	0.46	0.57	0.62
Other Broker Recs:	B: 2	S: 0	H: 1	H: -

Market Sentiment and Sales

The cancellation of HPR in Zhengzhou is expected to boost sales.
Central China's sales target for 2014 is set at a 23% growth or Rmb17.2bn.
Saleable resources for 2H14 are Rmb20.5bn, including Rmb11.7bn brought forward from 1H14.
A 52% sell-through rate is required to meet the sales target.
1H14 achieved a 39% sell-through rate.
Estimated contracted sales for 2014: Rmb15.4bn, a 10% y-o-y growth.
Potential upside from market recovery in Zhengzhou and other destocking efforts.

Dividend and Earnings

Interim dividend was suspended in 1H14, which is a surprise.
Full-year dividend payout ratio is maintained at 30%.
Dividend yield stands at 5.7% based on current price.
Revised down FY14/FY15F earnings due to revised construction plans and lower contracted sales estimates.
Cut FY14F/15F earnings by 11‰ and 20% respectively.
Maintain BUY due to attractive valuations.

Key Financials for 1H14

Metric	1H14	1H13	1H12	1H11	y-o-y %	Comments
Sales (RMB mn)	3,072	3,050	3,025	2,529	1%	-
Property Sales (RMB mn)	2,965	3,017	3,015	2,512	-2%	Recognized GFA sold dropped by 12% to 491k sm, while ASP of recognized sales increased by 11% to Rmb6k/sm mainly due to the change of product mix.
Property Leasing (RMB mn)	53	11	11	10	375%	The rental increase was mainly due to rental income from new shopping malls added to the portfolio.
Hotel (RMB mn)	54	22	-	7	149%	The increase was mainly due to the opening of Le Meridien Hotel in Zhengzhou.
Cost of Goods Sold (RMB mn)	(1,789)	(1,942)	(1,942)	(1,375)	-8%	-
Gross Profit (RMB mn)	1,283	1,107	1,083	1,154	16%	Gross margin increased by 5ppts to 41.8%.
SG&A (RMB mn)	(413)	(328)	(240)	(168)	26%	SG&A as % of presales increased by 0.9 ppts to 6.2%, while SG&A as % of revenue increased by 2.6 ppts.
Other Operating Income/(Expenses) (RMB mn)	50	27	(4)	(10)	87%	-
Operating Profit (RMB mn)	920	806	839	976	14%	-
Interest Income (RMB mn)	29	54	61	28	-47%	-
Other Revenue (RMB mn)	4	2	1	1	78%	-
Other Net Income (RMB mn)	(42)	169	(7)	(13)	n.a	-
Share of Losses of Associates and JV (RMB mn)	37	162	(10)	(42)	-77%	-
Fair Value Change of Embedded Derivatives and Loss on Senior Notes Redemption (RMB mn)	(3)	(237)	(53)	16	-99%	-
Finance Costs, Net (RMB mn)	(128)	(204)	(63)	(147)	-37%	-
Pre-Tax Profit Before Fair Value Gain on Investment Properties (RMB mn)	817	751	768	820	9%	-
Change in Fair Value of Investment Properties (RMB mn)	5	3	10	1	68%	-
Pretax Profit (RMB mn)	823	754	778	821	9%	-
Income Tax (RMB mn)	(187)	(250)	(234)	(224)	-25%	-
LAT (RMB mn)	(216)	(106)	(196)	(265)	104%	LAT increased mainly due to the improvement in margins and the Rmb89.1bn write-back of LAT over-provision in.
Taxation (RMB mn)	(403)	(356)	(430)	(489)	13%	-
Minority Interests (RMB mn)	(28)	(42)	(17)	(10)	-34%	-
Reported Profit (RMB mn)	392	357	332	322	10%	-
Core Earnings (RMB mn)	418	404	368	318	4%	-
Gross Profit Margin (%)	41.8%	36.3%	35.8%	46%	↑ 5 ppts	-
Core Net Profit Margin (%)	13.6%	13.2%	12%	13%	↑ 0 ppts	-
SG&A as % of Top Line (%)	13.4%	10.8%	7.9%	7%	↑ 3 ppts	-
SG&A as % of Presales (%)	6.2%	5.3%	4.7%	4%	↑ 1 ppts	-
Effective Tax Rate (%)	49%	47%	55%	60%	↑ 2 ppts	-
EPS (RMB)	0.161	0.146	0.14	0.16	10%	-
Core EPS (RMB)	0.172	0.166	0.15	0.15	4%	-
DPS (HK$)	-	0.052	0.045	-	n.a	No interim dividend was declared in 1H14.
Dividend Payout Ratio (%)	0%	28%	27%	0%	↓ 28 ppts	-
Contracted Sales (RMB Mn)	6,619	6,170	5,132	4,523	7%	-
Contracted ASP	6,843	6,765	-	-	1%	-
Contracted GFA	967	912	-	-	6%	-
GFA Delivery (‘000 sm)	491	555	576.0	290.5	-12%	-
ASP of Sales Recognized (RMB psm)	6,040	5,438	5,234	8,646	11%	-

Valuation and Market Comparison

Valuation Metrics: The company is trading at 3.6x PE, 69% discount to NAV, and 0.6x P/BV.
Valuation Comparison:
- Large Cap:
  - China Overseas: PE 14F 8.6x, 12.2x
  - Country Garden: PE 14F 5.2x, 11.5x
  - CR Land: PE 14F 7.2x, 15.2x
  - Evergrande: PE 14F 2.9x, 8.9x
  - Shimao Property: PE 14F 3.6x, 9.7x
  - China Vanke: PE 14F 7.5x, 6.5x
- Mid Cap:
  - Agile Property: PE 14F 5.1x, 5.0x
  - COGO: PE 14F 4.3x, 3.7x
  - Franshion: PE 14F 6.0x, 5.0x
  - Greentown: PE 14F 4.7x, 4.0x
  - Guangzhou R&F: PE 14F 3.2x, 2.4x
  - Hopson Dev: PE 14F 10.2x, 9.9x
  - KWG Property: PE 14F 4.7x, 4.0x
  - Poly (Hong Kong): PE 14F 5.7x, 5.1x
  - Shui On Land: PE 14F 14.1x, 10.1x
  - Sino-Ocean Land: PE 14F 8.2x, 6.8x
  - Soho China: PE 14F 10.6x, 20.5x
- Small Cap:
  - BJ Cap Land: PE 14F 6.4x, 5.6x
  - BJ North Star: PE 14F 17.8x, 24.4x
  - CC Land: PE 14F 6.3x, 5.3x
  - Central China: PE 14F 15.8x, 16.2x
  - China SCE: PE 14F 1.2x, 1.3x
  - CIFI Holdings: PE 14F 1.5x, 1.7x
  - Glorious Property: PE 14F 1.1x, 1.2x
  - Guangzhou R&F: PE 14F 4.2x, 3.6x
  - Hopson Dev: PE 14F 10.2x, 9.9x
  - KWG Property: PE 14F 4.7x, 4.0x
  - Poly (Hong Kong): PE 14F 5.7x, 5.1x
  - Shui On Land: PE 14F 14.1x, 10.1x
  - Sino-Ocean Land: PE 14F 8.2x, 6.8x
  - Soho China: PE 14F 10.6x, 20.5x
  - Ying Li: PE 14F 1.3x, 1.2x
  - Yuzhou Properties: PE 14F 1.0x, 1.0x
  - Zhong An: PE 14F 1.2x, 1.2x

Key Information

Market Recovery: The cancellation of HPR in Zhengzhou is expected to help sales recovery, with the Tianzhu project recording Rmb200m in sales shortly after.
Dividend Suspension: The interim dividend was suspended in 1H14, but the full-year payout ratio remains at 30%. This may affect investor confidence in the short term.
Earnings Revision: Earnings for FY14 and FY15 were revised down due to changes in construction plans and lower sales estimates.
Valuation: The company is currently trading at a discount to NAV, with a P/Book Value of 0.6x, lower than the small cap average of 4.1x.
Sales Target: The company maintains a 23% sales growth target for 2014, which is achievable with a 10% contracted sales growth.

Conclusion

Despite the suspension of the interim dividend and revised earnings estimates, Central China Real Estate maintains a BUY recommendation due to its attractive valuations. The company is well-positioned to benefit from the market recovery in Zhengzhou and other destocking efforts, which are expected to drive sales growth and improve financial performance in the coming quarters.

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