China Property:StdestockingWeek ending 7 Aug 2016
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Completed 09 Aug
AM HKT Disseminated 09 Aug
Asia Pacific Equity Research
09 August 2016
China Property
St destocking Week ending 7 Aug 2016
? 10-city sales up 25% Y/Y: For the week ending Aug 7, average daily primary sales in 10 key cities totaled 3,896 units, down by 5% W/W but up by 25% Y/Y. Tianjin, Hangzhou and Wuhan saw the strongest Y/Y gains of 129%, 71% and 52% respectively. Meanwhile, Dalian and Shenzhen recorded a steep decline of ~50% Y/Y. With the continually strong sales in Tianjin, we think tightening risk has increased in the city, but overall tightening is unlikely, in our view. ? Developers’ July sales remained strong: Developers’ July sales saw an average Y/Y growth of 80%. Evergrande’s July sales rose to a historical high of Rmb43bn, up 205% Y/Y. YTD, it has already reached 92% of its sales target. Similarly, for Country Garden, sales momentum remained strong at 244% Y/Y growth, and the company has achieved 71% of its sales target. These could imply an improvement in tier-3 cities, after &24 months of destocking. For Vanke, sales Y/Y growth slowed from 68% in June to 15% in July, which management attributed to the impact from shareholding structure. Contrary to consensus, we think market momentum could continue into 4Q 2016, with the market atmosphere further improving, driven by a further ASP increase, although by then the improvement will be mostly in lower-tier cities, but not the ones which have already outperformed. We stay cautious in 2017, though. ? Fujian targets to reduce inventory level to 15 months by 2018: On Aug 3, the Fujian government announced its destocking plan. At the provincial level, the government said it targets to reduce inventory months to 18 (for all commodity housing) and 15 (for residential), through (1) restricting new supply of commercial/office land, and (2) speeding up the “civilianizing” of rural migrants. In particular, Fujian stressed that policies in different cities/counties will remain localized, i.e. in certain tier-2 cities (i.e. Xiamen) which saw an ASP rally, tightening measures might be rolled out. Overall, we think destocking is the primary focus of policy direction, with ASP control a secondary. ? Shui On and SUNAC issued profit warnings: Shui On Land (272.HK) and SUNAC (1918.HK) have both announced profit warnings. For Shui On, management attributed the decline to (1) a drop in revaluation gains due to disposal of CA1&2, and (2) exchange losses, both of which are non-recurring. Thus, we expect its core earnings to remain resilient given its strong sales in Shanghai, and we still like its asset restructuring story. For SUNAC, the reasons given are (1) exchange losses, (2) decrease in profits after tax due to reduced delivery from JV projects, and (3) increase in interest expenses due to a lower percentage of interest capitalized. We think SUNAC could see further margin squeeze due to higher land, construction and financing costs. We believe these two companies are among only a few standalone cases, and profit warnings should not be com in particular, FX losses should be well contained with more refinancing activity. In general, developers’ interim results should see margin stabilization and growth.
China Property Ryan Li, CFA
ryan.lh. Bloomberg JPMA RLI &GO&
jevon. J.P. Morgan Securities (Asia Pacific) Limited
Average daily sales in 10 key cities
7-Aug-16 31-Jul-16 24-Jul-16 17-Jul-16 10-Jul-16 3-Jul-16 26-Jun-16 19-Jun-16 3,896 4,082 4,006 3,711 3,379 5,011 4,270 3,919
Source: CREIS, Housing Bureau, J.P. Morgan.
Weekly share price performance
Future Evergrande SUNAC Beijing Capital Land Joy City CIFI Vanke R&F Agile CR Land Greentown KWG Sino Ocean Poly Prop Country Garden Shimao SOHO China China SCE COGO Longfor China developer price index China South City China Jinmao Yuexiu REIT Yuexiu Property COLI Dalian Wanda HSI HSCEI C C Land Shui On Hopson Yanlord Hui Xian REIT 15% 14% 13% 13% 11%
7% 7% 6% 6% 6% 6% 5% 5% 5% 5% 5% 5% 4% 4% 4% 4% 4% 4% 3% 3% 3% 2% 2% 2% 1% 1% 1% 0%
Source: Bloomberg, J.P. M Aug 1 to Aug 8, 2016
Key reports
China Property: 1H16 results preview: The Inflexion Point
See page 10 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Table 1: Primary sales in 10 key cities C average daily sales
For the week ending Aug 7, 2016
(Units sold) Apr-16 4/3////2016 May-16 5/1/////2016 Jun-16 6/5////2016 Jul-16 7/3/////2016 Aug-16 8/7/2016 % Y/Y Yearly avg 14
W/W -15% -14% 6% 3% 3% -42% 128% 16% 4% -40% -51% 72% 112% -33% -25% 56% -2% -6% 36% 8% Y/Y 38% -2% -18% 18% -32%
W/W -30% -22% 28% -19% -6% -45% 95% 17% -6% 60% -29% 27% -15% 11% -22% 13% 18% -30% 18% -50% Y/Y 26% 19% -14% 61% -30%
W/W -46% 0% 14% 16% -22% -23% 17% 10% 20% -14% -29% 61% -4% 21% -29% 23% 24% -10% -25% 5% Y/Y 5% 11% -1% 37% 3%
W/W -14% -21% 35% 1% 13% -48% 79% 32% -12% -22% -34% 49% 17% -3% -21% 3% -4% 14% -22% 1% Y/Y 41% 12% -13% -4% 2%
W/W 20% -4% 4% 14% 3% -53% -3% 3% 26% -14% -15% 12% 13% 39% -40% 15% 8% -17% 30% 129% Y/Y -1% 37% -21% 35% 64%
W/W 5% -33% 5% 14% 21% -46% 29% 0% 20% -27% -10% 29% 9% 8% -28% -10% 14% 30% -31% 71% Y/Y 73% 9% 15% 37% 48%
W/W 3% -32% 15% 10% 25% -16% 0% -4% 36% -26% -25% 18% 16% 25% -39% 0% 18% 24% -38% 42% Y/Y 26% -2% -24% 28% 26%
W/W -13% -24% 50% 23% 32% -51% -5% -4% 12% -15% -3% 13% -14% 53% -49% 87% 3% 23% -46% -51% Y/Y 21% 25% -26% 22% -4%
W/W -4% -13% -9% 29% -14% -9% 15% -21% 49% -26% -26% -2% -4% 116% -54% 8% -12% 1% -8% -19% Y/Y 82% 25% -18% 47% 38%
W/W 0% 7% 12% -11% 16% -20% 6% -20% 12% 15% -20% 14% 2% -6% -17% -2% 3% 3% 32% 52% Y/Y NA 3% 15% 25% 36%
10city total 4,833 4,258 4,656 5,007 5,264 3,509 4,132 4,026 4,765 4,089 3,150 3,919 4,270 5,011 3,379 3,711 4,006 4,082 3,896
W/W -8% -12% 9% 8% 5% -33% 18% -3% 18% -14% -23% 24% 9% 17% -33% 10% 8% 2% -5% 25% 31% 30% -8% 29% 14%
208 180 190 196 203 117 266 310 322 193 95 164 346 233 174 272 265 250 340
93 73 93 76 71 39 75 88 83 132 94 119 102 113 88 100 118 83 97
528 529 601 698 545 420 493 544 652 562 400 643 617 744 526 647 804 721 538
291 229 310 312 351 181 325 427 377 292 192 287 335 324 256 264 253 287 225
889 857 892 1,020 1,047 497 481 494 622 537 456 511 579 807 485 559 604 504 653
784 523 548 623 754 404 522 522 629 462 417 537 586 635 458 415 474 617 427
419 283 325 357 448 378 379 363 493 366 275 325 378 473 287 286 337 419 259
94 72 107 131 174 86 82 79 88 75 73 82 71 109 55 103 106 130 71
582 504 457 590 510 461 532 419 626 463 343 336 324 700 321 348 307 310 284
946 1,009 1,134 1,003 1,163 925 977 779 874 1,006 806 915 933 873 729 718 738 760 1,002
336 329 270 318 217
110 132 113 182 127
391 434 430 590 609
274 307 266 255 261
233 320 251 340 557
196 213 244 334 494
259 254 194 248 311
73 91 68 82 78
201 251 206 303 417
416 427 491 615 836
2,112 2,756 2,532 3,263 2,576
Source: CREIS, Beijing Online Trading Centre, Shanghai Online Trading Centre, Shenzhen Land Resources and Housing Management Bureau, Chengdu Housing Management Bureau, Chongqing Land Resources and Housing Management Bureau, Tianjin Land Resources and Housing Management Bureau, . * Including economic housing
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Table 2: Secondary market average daily transactions
For the week ending Aug 7, 2016 Beijing Jan-16 1/3/2 016 1/10////2016 Feb-16 2/7////2016 Mar-16 3/6////2016 Apr-16 4/3////2016 May-16 5/1/////2016 Jun-16 6/5////2016 Jul-16 7/3/////2016 Aug-16 8/7/2016 % Y/Y 750 632 861 993 980 533 287 839 635 491 848 1,073 1,138 1,226 734 959 857 972 551 756 751 845 695 258 324 93* 40* 78* 579 546 694 533 W/W -4% -16% 36% 15% 13% -46% -46% 192% -24% -23% 73% 27% 6% 8% -40% 31% -11% 13% -43% 37% -1% 12% -18% -63% 25% -71% -57% 95% 642% -6% 27% -23% -2% Shenzhen 370 412 530 595 628 418 55 265 461 506 470 549 628 686 264 315 290 246 100 158 78 107 177 125 152 165 155 166 197 216 223 218 W/W -11% 11% 29% 12% 6% -33% -87% 382% 74% 10% -7% 17% 14% 9% -61% 19% -8% -15% -59% 58% -51% 38% 66% -30% 22% 8% -6% 7% 19% 9% 4% -2% -46% Chengdu 4 143 340 312 259 150 NA 151 218 240 256 319 360 362 314 406 459 466 193 344 347 358 311 204 365 246 359 294 310 297 318 273 W/W -99% % -8% -17% -42% NA NM 44% 10% 6% 25% 13% 1% -13% 29% 13% 1% -58% 78% 1% 3% -13% -34% 79% -33% 46% -18% 5% -4% 7% -14% 23% Tianjin 319 294 400 349 381 270 18 242 337 454 549 599 631 669 572 779 833 762 326 474 477 477 467 367 489 473 555 458 493 475 514 514 W/W -16% -8% 36% -13% 9% -29% -93% % 21% 9% 5% 6% -15% 36% 7% -9% -57% 45% 1% 0% -2% -21% 33% -3% 17% -17% 8% -4% 8% 0% 46% Tianjin ASP (Rmb/sqm) 6,454 7,432 7,953 7,732 8,212 9,738 1,612 7,299 7,465 7,660 7,629 8,308 8,082 8,492 6,646 8,774 8,360 8,490 5,840 8,030 7,604 8,080 7,820 6,607 7,896 8,417 7,941 8,139 7,940 7,737 8,423 8,152 W/W -17% 15% 7% -3% 6% 19% -83% 353% 2% 3% 0% 9% -3% 5% -22% 32% -5% 2% -31% 37% -5% 6% -3% -16% 20% 7% -6% 2% -2% -3% 9% -3% 13% Hangzhou 145 154 175 147 133 68 22 99 214 408 487 448 411 357 297 357 332 315 232 274 279 297 270 261 311 306 297 291 299 330 370 289 W/W -21% 6% 14% -16% -9% -49% -68% 358% 117% 90% 19% -8% -8% -13% -17% 20% -7% -5% -26% 18% 2% 7% -9% -3% 19% -1% -3% -2% 3% 11% 12% -22% 108%
Source: Soufun, , city real estate trading centers *Refers to the daily sales volume as of Jun 26 (Sun), Jul 3 (Sun) and Jul 10 (Sun) for the respective weeks as rest of the data is not available. ^ Chinese New Year week
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Table 3: Supply outlook
GFA available for sale# mn sqm 8.50 4.20 8.54 9.06 3.17 30.11 7.71 Take-up in 2016 YTD avg mn sqm 1.12 0.40 0.75 1.96 0.50 1.97 0.78 Months of supply based on YTD-2016 take-up Months 7.6 10.4 11.4 4.6 6.3 15.3 9.9 Avg Take-up in past 12 months mn sqm 1.05 0.50 0.93 2.02 0.53 1.86 0.79 Months of supply Months 8.1 8.5 9.2 4.5 6.0 16.2 9.8
Guangzhou# Shenzhen Beijing Shanghai Hangzhou* Chongqing Chengdu^
Source: City real estate trading center websites, J.P. Morgan estimates. # Defined as units with presale permits but not sold and unsold stocks. *Includes excludes Yuhang and Xiaoshan. ^Includes six districts such as Shuangliu, Pi’xian, Wenjiang, Xindu, etc. are excluded.
Table 4: Chinese developers C contracted sales
Contract sales Mar-16 Rmb mn 6,030 2,270 814 12,596 8,600 1,681 33,620 6,050 1,506 19,220 29,200 2,312 9,850 9,700 7,210 2,650 6,890 3,800 22,234 6,191 2,448 3,130 11,620 8,200 Contract sales Apr-16 Rmb mn 4,450 3,800 1,082 12,995 8,220 1,320 35,650 6,710 1,769 22,050 23,060 1,586 7,110 10,900 5,310 2,036 6,500 2,600 20,061 5,627 2,651 2,870 10,680 8,290 Contract sales May-16 Rmb mn 4,800 3,140 2,629 14,636 8,150 1,839 36,780 5,330 2,650 30,630 21,710 2,073 6,750 9,600 5,110 2,109 10,190 3,200 18,463 7,201 4,853 4,250 10,780 12,210 Contract sales Jun-16 Rmb mn 6,800 5,680 4,111 19,816 12,700 4,438 42,410 4,490 3,370 29,520 31,340 6,400 9,690 8,500 5,710 1,942 8,390 3,000 26,977 10,100 3,236 6,750 14,280 14,800 Contract sales Jul-16 Rmb mn 3,580 3,750 NA NA NA NA 27,430 5,010 NA 24,350 43,010 NA 8,110 6,600 4,480 NA NA NA 12,145 5,102 1,277 NA 9,040 NA M/M Y/Y 2016 Sales target Rmb bn 46.0 38.0 18.0 154.0 96.0 15.5 300.0 43.8 NA 220.0 200.0 36.0 NA 60.0 60.0 22.0 62.0 28.0 NA 67.0 24.0 45.0 80.0 100.0 2016 target achieved % 70% 53% 52% 52% 58% 77% 73% 74% NA 68% 92% 45% NA 87% 57% 52% 62% 61% NA 59% 75% 46% 81% 51%
Agile Beijing Capital Land* Central China COLI China Resources Land China SCE China Vanke CIFI COGO Country Garden^ Evergrande China Jinmao Gemdale Greentown Guangzhou R&F KWG Longfor Poly Property Poly Real Estate Shimao Shui On Land Sino-Ocean Group SUNAC Wanda
-47% -34% NA NA NA NA -35% 12% NA -18% 37% NA -16% -22% -22% NA NA NA -55% -49% -61% NA -37% NA
58% 102% NA NA NA NA 15% 268% NA 244% 205% NA 43% 65% -3% NA NA NA 26% 26% -82% NA 71% NA
Source: Soufun, Company data. ^Sales target raised from Rmb168 bn to Rmb220 bn.
Table 5: Major equity-raising summary starting from 2H15
Date Developer LVGEM China Logan Ronshine China Holdings Hailan Holdings Ticker 95 HK 3380 HK 3301 HK 2278 HK Type Placement Placement IPO IPO Announced 30-Oct-15 25-Nov-15 30-Dec-15 22-Jun-16 Issue Price per share (LC) 2.20 2.78 5.36 3.96 No of Shares Issued (mn share) 1,661 558 338 75 No of Shares Outstanding before Equity Issuance 1,384
300 % existing share capital 120.00% 10.03% 25.00% 25.00%
Source: Company data, HKExnews, J.P. Morgan. Note: Equity raisings in pending stage are NOT included.
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Table 6: Summary of debt financing by major developer (2016 YTD)
Date Developer COFCO Prop. Inv. Shanghai Shimao R&F Evergrande Evergrande Poly Real Estate Group Poly Real Estate Group Logan Powerlong Real Estate Shimao China Fortune Land Greenland Greenland SOHO China R&F Longfor Longfor Nanjing Chixia Dev Gemdale Gemdale Poly Real Estate Poly Real Estate Financial Street Avic Real Estate China Fortune Land Country Garden Powerlong Longfor Longfor SUNAC China Vanke China Fortune Land Shanghai Forte Land Shanghai Shimao Jinke Properties Gemdale Gemdale China Fortune Land Country Garden Dalian Wanda Future Land Future Land R&F R&F Central China Shenzhen OCT Financial Street China Fortune Land Aoyuan Dalian Wanda Fantasia Dalian Wanda Sino-Ocean Group Xinhu Zhongbao Ping An Real Estate Dalian Wanda Macrolink Real Estate Financial Street Dalian Wanda CSCEC Ningbo Aux Property Ticker 600823.CH 2777 HK 3333 HK 3333 HK 600048 CH 600048 CH 3380 HK 1238 HK 813 HK 600340 CH 337 HK 337 HK 410 HK 2777.HK 960 HK 960 HK 600533 CH 600383 CH 600383 CH 6000048 CH 6000048 CH 000402 CH 000043 CH 600340 CH 2007 HK 1238 HK 960 HK 960 HK 1918 HK 2202 HK 600340 CH 2337 HK 600823 CH 000656 CH 600383 CH 600383 CH 600340 CH 2007 HK 3699 HK 1030 HK 1030 HK 2777 HK 2777 HK 832 HK 000069 CH 000402 CH 600340 CH 3883 HK 3699 HK 1777 HK 3699 HK 3377 HK 600208 CH 3699 HK 000620 CH 000402 CH 3699 HK 601668 CH Type Domestic bond Domestic bond Domestic bond USD private notes USD private notes Domestic bond Domestic bond USD senior notes Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic MTN Domestic bond Domestic bond Domestic bond Domestic MTN Domestic bond Domestic bond Domestic bond Domestic bond Domestic MTN Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond USD senior notes Domestic MTN Dim sum bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic MTN Domestic bond Announced 6-Jan-16 6-Jan-16 7-Jan-16 11-Jan-16 11-Jan-16 13-Jan-16 13-Jan-16 18-Jan-16 14-Jan-16 17-Jan-16 18-Jan-16 19-Jan-16 19-Jan-16 20-Jan-16 20-Jan-16 22-Jan-16 22-Jan-16 18-Feb-16 19-Feb-16 19-Feb-16 23-Feb-16 23-Feb-16 24-Feb-16 26-Feb-16 1-Mar-16 1-Mar-16 2-Mar-16 2-Mar-16 2-Mar-16 6-Mar-16 7-Mar-16 8-Mar-16 17-Mar-16 17-Mar-16 17-Mar-16 18-Mar-16 18-Mar-16 23-Mar-16 28-Mar-16 24-Mar-16 29-Mar-16 29-Mar-16 5-Apr-16 5-Apr-16 8-Apr-16 11-Apr-16 12-Apr-16 18-Apr-16 18-Apr-16 22-Apr-16 26-Apr-16 4-May-16 17-May-16 17-May-16 17-May-16 20-May-16 26-May-16 1-Jun-16 3-Jun-16 20-Jun-16 24-Jun-16 Term 5-year 1 year 5-year 3-year 3-year 5-year 7-year 4-year 5-year 5-year 7-year 5-year 5-year 3-year 5-year 5-year 8-year 5-year 5-year 5-year 10-year 5-year 5-year 5-year 5-year 5-year 5-year 10-year 6-year 5-year 5-year 5-year 3-year 3-year 3-year 8-year 6-year 5-year 4-year 5-year 3-year 3-year 7-year 6-year 5-year 7-year 5-year 5-year 3-year 5-year 3-year 5-year 5-year 5-year 3-year 5-year 3-year 5-year 5-year 3-year 5-year Maturity 14-Jan-21 12-Jan-17 11-Jan-21 19-Jan-19 19-Jan-19 11-Jan-21 11-Jan-23 19-Jan-20 18-Jan-21 18-Jan-21 20-Jan-23 21-Jan-21 21-Jan-21 22-Jan-19 22-Jan-21 25-Jan-21 25-Jan-24 25-Feb-21 26-Feb-21 26-Feb-21 25-Feb-26 25-Feb-21 25-Feb-21 1-Mar-21 3-Mar-21 2-Mar-21 7-Mar-21 4-Mar-26 4-Mar-22 7-Mar-21 11-Mar-21 9-Mar-21 21-Mar-19 21-Mar-19 22-Mar-19 22-Mar-24 22-Mar-22 24-Mar-21 29-Mar-20 29-Mar-21 29-Mar-19 29-Mar-19 7-Apr-23 7-Apr-22 12-Apr-21 13-Apr-23 13-Apr-21 18-Apr-21 25-Apr-19 28-Apr-21 2-May-19 6-May-21 19-May-21 21-May-21 23-May-19 24-May-21 30-May-19 1-Jun-21 13-Jun-21 24-Jun-19 28-Jun-21 CCY RMB RMB RMB USD USD RMB RMB USD RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB USD RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB Amount Raised (LC n) 1,500.0 2,000.0 2,000.0 400.0 300.0 2,000.0 1,000.0 260.0 1,000.0 4,000.0 1,000.0 1,000.0 9,000.0 3,000.0 3,600.0 2,300.0 1,800.0 480.0 1,000.0 1,000.0 3,000.0 2,000.0 2,000.0 1,500.0 2,000.0 4,000.0 500.0 1,500.0 2,500.0 3,500.0 1,500.0 2,800.0 1,000.0 2,000.0 1,100.0 1,700.0 1,300.0 3,000.0 4,000.0 6,000.0 1,850.0 1,150.0 500.0 500.0 1,000.0 1,000.0 1,500.0 2,000.0 250.0 6,000.0 600.0 8,000.0 4,000.0 3,500.0 2,000.0 2,000.0 1,000.0 1,500.0 3,000.0 2,000.0 810.0 Annual Rate 3.200% 3.000% 3.950% 7.800% 8.000% 3.190% 2.950% 7.700% 6.200% 4.800% 4.880% 3.800% 3.480% 3.450% 3.950% 3.300% 3.680% 4.800% 3.690% 3.690% 4.190% 2.960% 3.830% 3.290% 4.040% 4.750% 6.000% 3.750% 3.190% 5.400% 3.200% 5.400% 3.600% 3.290% 5.300% 3.500% 3.000% 5.190% 4.550% 3.700% 5.440% 4.760% 3.950% 3.480% 6.000% 3.400% 3.800% 5.300% 6.525% 4.000% 9.500% 3.950% 3.500% 5.200% 3.600% 3.950% 7.000% 3.850% 3.880% 3.250% 7.500%
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Table 7: Summary of debt financing by major developer (2016 YTD) C continued
Date Developer Hopson Development China Jinmao Dalian Wanda Shanghai Shimao Red Star Macalline Red Star Macalline Longfor Longfor Financial Street Kaisa Kaisa Kaisa Kaisa Kaisa Kaisa Beijing Hongkun Weiye Sichuan New Hope Rongqiao Wuhan Real Estate Group Lujiazui Shanghai Greenland HK Greenland HK KWG Dalian Wanda KWG Agile Ping An Real Estate Ticker 754 HK 817 HK 3699 HK 600823 CH 1528 HK 1528 HK 960 HK 960 HK 000402 CH 1638 HK 1638 HK 1638 HK 1638 HK 1638 HK 1638 HK 600663 CH 337 HK 337 HK 1813 HK 3699 HK 1813 HK 3383 HK Type Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond USD notes USD notes USD notes USD notes USD notes USD notes Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond USD notes USD notes Domestic bond Domestic bond Domestic bond Domestic bond Domestic bond Announced 27-Jun-16 7-Jul-16 7-Jul-16 7-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 11-Jul-16 12-Jul-16 12-Jul-16 13-Jul-16 19-Jul-16 20-Jul-16 20-Jul-16 21-Jul-16 21-Jul-16 22-Jul-16 28-Jul-16 29-Jul-16 3-Aug-16 Term 3-year 1-year 5-year 3-year 7-year 5-year 7-year 5-year 5-year 3.5-year 4.5-year 5-year 4-year 5.5-year 3.5-year 5-year 5-year 5-year 5-year 9-month NA 3-year 5-year 5-year 5-year 4-year 7-year Maturity 27-Jun-19 12-Jul-17 12-Jul-21 12-Jul-19 13-Jul-23 13-Jul-21 14-Jul-21 14-Jul-23 12-Jul-21 31-Dec-19 31-Dec-20 30-Jun-21 30-Jun-20 31-Dec-21 31-Dec-19 18-Jul-21 13-Jul-21 15-Jul-21 22-Jul-21 18-Apr-17 Perpetual 28-Jul-19 21-Jul-21 27-Jul-21 28-Jul-21 29-Jul-20 5-Aug-23 CCY RMB RMB RMB RMB RMB RMB RMB RMB RMB USD USD USD USD USD USD RMB RMB RMB RMB RMB USD USD RMB RMB RMB RMB RMB Amount Raised (LC n) 3,100.0 1,000.0 2,000.0 1,500.0 750.0 750.0 1,000.0 1,000.0 1,500.0 259.5 610.3 665.8 499.4 721.3 277.4 400.0 1,000.0 800.0 1,000.0 2,000.0 120.0 450.0 2,000.0 2,000.0 1,300.0 3,000.0 1,000.0 Annual Rate 4.950% 2.900% 3.450% 3.380% 4.290% 3.500% 3.060% 3.680% 3.730% 5.560% 6.560% 6.560% 6.560% 6.560% 6.560% 4.000% 3.850% 5.800% 3.470% 2.750% 5.625% 3.875% 4.850% 3.360% 4.950% 4.980% 3.280%
‘Source: HKEx, Bloomberg, Company data
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Table 8: Recent major land transactions (via public auction)
Date Location Address GFA sqm Usage Price AV Developer(s) Rmb mn Rmb psm Premium to opening bid 329% 18% 0% 0% 0% 113% 89% 0% 101% 108% 54% 129% 0% 2% 0% 6% 0% 0%
PRD 04/Aug/16 03/Aug/16 01/Aug/16 Bohai Rim 05/Aug/16 04/Aug/16 04/Aug/16 YRD 05/Aug/16 04/Aug/16 03/Aug/16 03/Aug/16 03/Aug/16 02/Aug/16 01/Aug/16 Western 04/Aug/16 04/Aug/16 Others 04/Aug/16 02/Aug/16 02/Aug/16
Dongguan Foshan Guangzhou Tianjin Tianjin Tianjin Ningbo Ningbo Shanghai Shanghai Shanghai Hangzhou Hangzhou Chongqing Chongqing Qingdao Qingdao Changsha
樟木头镇樟罗社区 佛山市高明区西江新城苏河路以西 明珠湾起步区工业四路西侧地块 天津市静海区商贸物流园区内 天津市滨海新区汉沽海丰路以西 南开区红旗路与黄河道交口东南侧 高新区 GX08-01-23 地块 鄞州区集士港镇四明山地段 青浦区朱家角镇淀惠路北侧 35-04 地块 青浦区盈浦街道淀惠路北侧 37-02 地块 青浦区盈浦街道淀惠路北侧 36-01 地块 河庄街道 天目山镇白鹤片 B-09 地块 两江新区大竹林组团 G 标准分区 南岸区南坪组团 M 分区 M10-3-2/06 号宗地 李沧区书院路以南、滨河路以北 惜福镇街道正阳路北侧、百福路东侧 雨花区跳马镇白竹村
23,926 123,532 66,020 279,951 119,788 75,000 47,536 141,465 46,900 61,459 90,698 78,424 133,821 87,737 79,226 117,294 86,581 604,624
Mixed Mixed Comm Mixed Mixed Mixed Res Comm Res Res Mixed Mixed Comm Res Comm Mixed Mixed Comm
318 251 277 465 286 1,810 726 116 1,412 1,913 1,960 405 100 430 198 462 104 321
13,298 2,032 4,200 1,661 2,388 24,133 15,269 820 30,107 31,126 21,610 5,164 750 4,901 2,499 3,935 1,197 531
北大资源 广东美的置业 中铁隧道局 华海德嘉投资 滨海荣泰置业 正荣荣泰置业 杭州融鑫恒投资 China OCT Country Garden/|原 Beijing Capital Land 中南 德清金美投资 杭州滨江集团 Longfor N/A 钱江景园置业 鲁商惜福置业 红星大市场
Source: Compa Source: HKEx, Bloomberg, Company data, Soufun, CREIS
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Table 9: China developers C Valuation summary
Price Market cap Rating COLI CR Land China Vanke - H Dalian Wanda Country Garden Shimao Properties Longfor Properties Evergrande Shui On Land Joy City KWG Property Sino-Ocean Group Agile Guangzhou R&F China Jinmao CIFI Future Holdings Poly Property Greentown COGO SUNAC China South City Kaisa Beijing Capital Land China Vanke - A Poly Real Estate - A Gemdale Corp - A China Merchant Shekou - A Financial Street - A Risesun Real Estate - A Beijing Capital Dev - A Shanghai Shimao - A N OW OW NC OW OW OW UW OW OW OW N N N N NC NC NC NC NC NC NC NC NC N OW UW NC NC NC NC NC Stock Code 0688.HK 1109.HK 2202.HK 3699.HK 2007.HK 0813.HK 0960.HK 3333.HK 0272.HK 0207.HK 1813.HK 3377.HK 3383.HK 2777.HK 0817.HK 0884.HK 1030.HK 0119.HK 3900.HK 0081.HK 1918.HK 1668.HK 1638.HK 2868.HK 000002.CH 600048.CH 600383.CH 001979.CH 000402.CH 002146.CH 600376.CH 600823.CH 8-Aug-16 LC$ 26.65 20.70 19.18 50.50 3.37 10.70 11.22 5.61 2.12 1.42 5.01 3.50 4.77 12.34 2.25 2.15 1.35 2.20 5.97 2.33 5.49 1.67 1.56 3.33 21.87 9.48 10.42 15.75 11.06 7.60 11.86 7.21 4.27 4.85 3.53 3.36 2.57 US$mn 33,877 18,496 35,173 29,474 9,649 4,764 8,442 9,894 2,194 2,605 1,972 3,390 2,409 5,126 3,095 1,859 985 1,038 1,664 686 2,408 1,724 1,033 1,300 35,177 16,875 7,040 18,688 4,962 4,961 4,593 2,900 1,101 1,779 512 2,738 313 NAV Discount Current -14% -48% -13% NA -29% -43% -51% 39% -53% -58% -51% -71% -55% 30% -51% NA NA NA NA NA NA NA NA NA 16% -57% -24% NA NA NA NA NA -1% NA NA NA NA -22% -10% NA P/E FY16E (X) 8.1 9.6 7.6 10.1 7.0 5.3 6.8 21.3 13.5 24.4 3.5 6.7 7.8 5.3 6.0 4.5 6.1 25.5 6.0 3.9 5.8 8.7 2.4 5.4 10.0 8.5 8.9 14.4 12.5 10.0 11.8 8.5 25.5 26.4 15.2 13.2 NA 9.0 10.7 19.4 Div Yield FY16E (%) 2.8% 3.2% 6.6% 2.8% 3.9% 6.7% 5.1% 7.1% 3.4% 1.4% 8.1% 6.0% 7.2% 7.5% 5.8% 7.7% 6.2% 0.7% 3.0% 2.1% 3.4% 4.4% 11.9% 6.3% 5.0% 2.2% 1.8% 2.2% 2.7% 2.6% 3.1% 1.4% 8.0% 6.3% 6.6% 8.5% NA 4.6% 3.3% 7.6% P/B Net gearing FY16E (X) 1.21 1.12 1.64 1.20 0.91 0.51 0.90 1.16 0.38 0.66 0.53 0.50 0.41 0.79 0.55 0.83 0.72 0.25 0.41 0.40 0.76 0.42 0.38 0.60 2.17 1.28 1.18 2.36 1.21 1.44 1.25 0.92 1.06 0.94 0.64 0.66 NA 1.11 1.81 0.81 FY16E (%) -4% 23% -1% 66% 92% 85% 58% 391% 89% 63% 85% 35% 69% 165% 110% 33% NA 100% 95% 23% 128% 72% 66% NA -1% 173% 73% 14% 183% 106% 261% 5% 93% 110% NA 14% NA 59% 66% 55% Avg trading value 3-month US$ mn 52.57 27.79 37.37 15.81 5.95 7.57 4.80 13.67 1.77 1.13 2.77 3.01 2.55 9.75 1.58 1.07 0.58 2.03 1.77 0.32 8.31 1.69 NA 1.14 257.61 48.91 29.81 74.55 40.33 13.56 26.20 6.77 0.04 2.65 0.22 1.27 0.04 24.34 124.98 1.36
Jinmao Investments N 6139.HK Yuexiu REIT NC 405.HK Spring REIT NC 1426 HK Hui Xian REIT NC 87001.HK New Century REIT NC 1275.HK HK-listed sector average (market cap weighted) A-share sector average (market cap weighted) REIT sector average (market cap weighted)
Sources: Company data, Bloomberg and J.P. Morgan estimates. *Bloomberg estimates for companies marked with “NC” (i.e. not covered) in rating.
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
Figure 1: China Property: NAV discount chart (ex Vanke and COLI)
NAV discount (%)
10% 0% -10% -20% -30% -40% -50% -60% -70% -80% Jan 08 Jan 09 -1 Std dev -2 Std dev Feb 10 Mar 11 Apr 12 May 13 Jun 14 Jul 15 Aug 16 Long Term Avg: -40% +2 Std dev +1 Std dev
Figure 2: China Property: P/BV (ex Vanke)
7.0 6.0 5.0 4.0 3.0 2.0 1.0 -1 Stdev 0.0 Jan 03 Jun 04 Oct 05 Feb 07 Jun 08 Nov 09 Mar 11 Jul 12 Nov 13 Apr 15 Aug 16
Source: Bloomberg, J.P. Morgan estimates, Company data.
+2 Stdev +1 Stdev
Average = 1.7X
Source: Bloomberg, J.P. Morgan estimates, Company data.
Figure 3: China Property: 12-month rolling forward P/E (ex Vanke & bubble period) X
23 21 19 17 15 13 11 9 7 5 Jul 08 Aug 09 -1 Std dev Oct 10 Dec 11 Feb 13 Apr 14 Jun 15 Aug 16 +2 Std dev +1 Std dev Average = 9.64x
Figure 4: China Property: 12-month rolling forward P/E (ex bubble period) C big-caps vs. mid-caps
80 70 60 50 40 30 20 10 0 Jan 06 Aug 07 Feb 09 Aug 10 Feb 12 Aug 13 Feb 15 Aug 16
Source: Bloomberg, J.P. Morgan estimates, Company data.
Mid-cap P/E
Source: Bloomberg, J.P. Morgan estimates, Company data.
Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
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Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
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Ryan Li, CFA (852)
Asia Pacific Equity Research 09 August 2016
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