20130924-DBS_Group-Liquidity_dries_up_on_4Q_sales_43页_947kb

Summary of Document Content

Core Content

The document provides an overview of the current state of the Chinese property sector, focusing on the sales performance and policy updates in different tiers of cities. It highlights a specific project, Vanke - Dongguan Jinyu, and discusses its performance and financial projections. The report also includes insights into share price performance, new project launches, and inventory levels across Tier I, II, and III cities.

Project of the Week: Vanke - Dongguan Jinyu

• Project Name: Jinyu International
• Developer: Vanke
• City: Dongguan, Guangdong
• Project Type: Residential and commercial complex
• Target Audience: First home buyers and upgraders
• Launch Date: August 2012
• Units Sold by End-Aug 2013: 1,700 out of 2,000 units
• 2013 Sales Target: Rmb1bn
• Saleable Resources: Rmb1bn
• Current Sales (YTD): Rmb680m
• Achievement Rate: 68%
• Average Selling Price (ASP): Rmb9,500/sm (up from Rmb6,800/sm in 2012)
• Estimated Gross Margin: 30%
• Estimated Net Margin: 14%

Policy Update

• Liquidity Tightening: Banks in Tier I/II cities have suspended or reduced mortgage loans, especially for second-hand properties, due to exhausted quotas.
• Expected Impact: Tight liquidity is likely to continue throughout the year, affecting 4Q sales.
• Key Policy Changes:
  • Chengdu: Increased downpayment for HPF to 30%, reduced mortgage term to 20 years.
  • Beijing: Raised land appreciation tax for second-hand property transactions to 5%.
  • Baotou: Increased HPF mortgage cap to Rmb500k and extended mortgage term to 30 years.
  • Nanjing: Required 33 SOE developers to exit commodity housing development.
  • Shenzhen: Adjusted ordinary housing definitions and provided tax exemptions for second-hand properties.
  • Zhengzhou: Tightened controls on non-ordinary residential projects and set price limits.
  • Wenzhou: Allowed rural land property rights to be traded publicly, with limited scope.
  • Ningxia: Enabled HPF to be used for family members' home purchases.
  • Hangzhou: Facilitated conversion from HPF to commercial mortgage.

Weekly Sales Performance

Tier I Cities

• Total Units Launched: 3,603
• Average Sale-Through Rate: 70%
• Sales Volume Decline: 24% w-o-w
• ASP Decline: 3% w-o-w
• City-Specific Performance:
  • Beijing: GFA sales of 258k sm, -27% w-o-w, -3% y-o-y
  • Shanghai: GFA sales of 351k sm, -12% w-o-w, 50% y-o-y
  • Shenzhen: GFA sales of 44k sm, -56% w-o-w, -30% y-o-y
  • Guangzhou: GFA sales of 174k sm, 1% w-o-w, 0% y-o-y
  • Tier I Average: GFA sales of 207k sm, -24% w-o-w, 6% y-o-y

Tier II Cities

• Total Units Launched: 5,840
• Average Sale-Through Rate: 68%
• Sales Volume Decline: 13% w-o-w
• ASP Decline: 3% w-o-w
• City-Specific Performance:
  • Tianjin: GFA sales of 217k sm, 7% w-o-w, 5% y-o-y
  • Wuhan: GFA sales of 348k sm, -13% w-o-w, 8% y-o-y
  • Chengdu: GFA sales of 151k sm, -13% w-o-w, -23% y-o-y
  • Chongqing: GFA sales of 315k sm, -28% w-o-w, -10% y-o-y
  • Tier II Average: GFA sales of 143k sm, -13% w-o-w, -2% y-o-y

Tier III Cities

• Total Units Launched: 54k sm
• Average Sale-Through Rate: 2%
• Sales Volume Growth: 2% w-o-w
• ASP Decline: 3% w-o-w
• City-Specific Performance:
  • Dongguan: GFA sales of 201k sm, 26% w-o-w, 82% y-o-y
  • Shantou: GFA sales of 13k sm, 122% w-o-w, 19% y-o-y
  • Tier III Average: GFA sales of 54k sm, 2% w-o-w, 11% y-o-y

Inventory Level

• Average Weeks to Digest Inventory: 59 weeks
• Key City Inventory Levels:
  • Beijing: 7,772k sm (29 weeks)
  • Shanghai: 9,278k sm (24 weeks)
  • Shenzhen: 2,806k sm (38 weeks)
  • Guangzhou: 6,684k sm (32 weeks)
  • Hangzhou: 6,159k sm (69 weeks)
  • Ningbo: 9,233k sm (100 weeks)
  • Qingdao: 12,052k sm (48 weeks)
  • Nanjing: 4,288k sm (22 weeks)
  • Fuzhou: 2,286k sm (126 weeks)
  • Nanning: 5,602k sm (51 weeks)
  • Huizhou: 2,227k sm (35 weeks)
  • Zhouzhou: 1,732k sm (117 weeks)
  • Dongying: 2,694k sm (81 weeks)

Sector Valuation and Investment Recommendation

• Sector Valuation:
  • FY14 PE: 6.5x
  • P/BV: 0.9x
  • Discount to NAV: 49%
  • Historical Average:
    • PE: 10x
    • P/BV: 1.2x
    • NAV Discount: 37%
• Sector Outlook: Expected to range trade due to lack of strong near-term catalysts.
• Recommendation: Focus on developers' fundamentals.
• Top Picks: COLI, COGO, and Country Garden.

Share Price Performance

• Share Price (Sep 16 – Sep 19): Graph included.
• Share Price (Excl. SPG), YTD: Graph included.
• Daily Volume (Sep 16 – Sep 19): Graph included.

New Projects Launched (Sep 16 – Sep 22)

• Tier I Cities: 13 projects launched, 8 in Shanghai.
• Tier II Cities: 26 projects launched, 14 in Wuhan.
• Tier III Cities: Data not fully available.

ASP Comparison

Analysts

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

Recent Reports

• Greenland (HK) (337.HK): "Poly HK or COGO?" (24 Sep)
• China Property Sector: "Ground check: slower cash collection in southern China" (19 Sep)
• Yuexiu (123.HK): "Needs to pace land banking" (16 Sep)
• Yuzhou Properties (1628.HK): "SG NDR takeaways: Focused regional expansion" (13 Sep)
• China Property Sector: "Expecting sales to pick up" (13 Sep)
• Agile (3383.HK): "Further presales pick-up expected in Sep" (13 Sep)
• Country Garden (2007.HK): "Peak sales season begins" (12 Sep)
• China Property Sector: "Post-1H results: Weak margins yet to bottom out" (11 Sep)
• COLI (688.HK): "Pace new launches" (11 Sep)

Major Land Acquisitions by Key Developers

News Update

• Nationwide: Housing prices increased in 66 cities m-o-m in August, with the highest growth rate of 1.7%. At least one developer received approval for a refinancing programme.
• East China: Nanjing tightened property sales controls, requiring double-checking buyer eligibility before formal agreements.

Conclusion

The property sector in China is experiencing a slowdown in sales, particularly in Tier I and II cities, due to tightened liquidity and policy changes. Vanke's Dongguan Jinyu project is performing well, with a strong ASP and expected profitability. The sector is currently undervalued and lacks strong near-term catalysts, so investors are advised to focus on fundamentals. Key developers such as COLI, COGO, and Country Garden are recommended as top picks.