中国房产开发商报告展望

1、october 21, 2010 china: real estate developers 2011 outlook: volume names to outperform; buy evergrande, vanke prices to decline; achieving volume is the key growth driver we think the tug-of-war between the government, developers, and homebuyers our base, bear-case valuations may continue for some

2、time, but in a local central government synchronized 12-m target price bear-case valuation policy environment and with gradually rationalizing homebuyer sentiment, we 19/octratinglcy potential upside/ downside implied upside/ downside expect developers weakening balance sheets, but rising inventory

3、to eventually have an effect on selling prices. we expect property prices to decline 20% from current levels over the next 12 months. we retain our 10% p.a. price increase forecast for 2012e/2013e as we believe price recovery in future will be limited by government policies until a meaningful scale

4、of social housing is built. consequently, we believe achieving asset turnover will become more important than price when it comes to driving earnings growth and stock valuations. key themes: exposure to central/western china, brand, strong b/s we expect our coverage universe to increase market share

5、 amid a prolonged industry slowdown and to improve their medium-term earnings growth visibility. in particular, we are more positive on names that are (1) rapidly expanding their exposure to central and western china and (2) focusing on fantasia evergrande agile vanke (a) poly hk sino ocean poly gem

6、dale vanke (b) country garden crl coli franshion e-house powerlong yanlord forte soho r prefer evergrande and vanke (a) we introduce (1) our end-2011e nav estimates, which now factors in our new price assumptions (largely the same magnitude as our previous estimate but pushed back to 2011), further

7、rmb appreciation, and recent acquisitions by developers and (2) our scorecard for developers based on the key themes above. as a consequence, we adjust our tp discount to nav based on the scorecard by +/-10ppt, revise our tps for the sector by an average of 27%, and revise our 2010e-2012e underlying

8、 eps forecast by 8%-14%. we upgrade country garden and sino-ocean to buy; forte to neutral; remove szi from our conviction sell list but maintain our sell rating on the stock; downgrade powerlong to neutral; retain our buy ratings on evergrande (on buy, cl) , agile, crl, poly hk; vanke a/b (a is on

9、buy, cl), poly, gemdale, and fantasia. evergrande, and vanke a remain our top buys (on buy, cl); retain our sell ratings on greentown, oct, cwtc, and ifm. ifm is our top sell (on sell, cl). key risks: upside: stronger-than-expected volume growth; potential m prefer evergrande, vanke (a) may 19, 2010

10、, short-term pain, long-term gain; add evergrande, vanke a to c-buy february 22, 2010, reshuffling picks on new risk/reward analysis amid tightening yi wang, cfa +86(21)2401-8930 beijing gao hua securities company limited jason sun +86(10)6627-3187 beijing gao hua securities company limited vicky li

11、 +86(21)2401-8926 beijing gao hua securities company limited the goldman sachs group, inc. the goldman sachs group, inc. 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 affec

12、t the objectivity of this report. investors should consider this report as only a single factor in making their investment decision. for reg ac certification, see the end of the text. other important disclosures follow the reg ac certification, or go to analysts employed by non-us affiliates are not

13、 registered/qualified as research analysts with finra in the u.s. global investment research 2 6 8 13 22 24 2 october 21, 2010china: real estate developers table of contents overview: still a difficult path ahead; volume names to outperform fine tune our forecasts; rollover nav-based tps to end-2011

14、e price to decline on accelerating inventory builds up our top picks: buy evergrande and vanke (a); sell ifm appendix i: quantitative analysis to derive our scorecard appendix ii: hpr, breakdown, land acquisition analysis, and development activities the prices in the body of this report are based on

15、 the market close of october 19, 2010. the author would like to thank jacqueline du for her contribution to this report. overview: still a difficult path ahead; volume names to outperform policy intervention on price unlikely to cease we expect housing upgrades and investment demand in chinas main c

16、ities (tier-1/tier-2) to remain vibrant given an environment of low real interest rates, limited investment channels versus a backdrop of rapid wealth accumulation by high-net-worth individuals (see our report dated june 24, 2010, “short-term pain, long-term gain (part 2); prefer evergrande, vanke a

17、” ). this indicates to us that the governments decision to intervene in the market is unlikely to cease until a more meaningful scale of social housing is developed (we believe this is one of the key objectives of the governments policy tightening measures). apart from the recent restriction on home

18、 purchases across several cities in china (which could be expanded to include additional coastal cities), we think a property holding tax (which was introduced in 1986 but not implemented) could be revived and implemented in some of chinas larger cities in the future. weakening balance sheets, incre

19、asing inventory levels, and a decline in demand will eventually have a knock-on effect on price although property prices have not come down much from the march/april peak (prices declined in may and june and then recovered from late june onwards), we expect heightened policy tightening measures, dev

20、elopers weakening balance sheets, and growing inventory levels to eventually have a knock-on effect on property prices. we expect property prices to continue their downward spiral over the next 12 months with lower-quality properties in non-core areas of these cities being impacted harder. goldman s

21、achs global investment research 3 october 21, 2010 exhibit 1: summary of our new price/volume assumption china: real estate developers base-case:price changevolume change from average 09yoyyoyyoyyoyyoyyoy 2010e2011e2012e2013e afterwards2010e2011e previous current 0% 10% 5% 0% 10% 10% 10% 10% 0% prev

22、ious 0% current -30% -30% 50% 35% spot price change 200 180 173 160 140 150 155 base-case 124 120 100 100 80 60 40 20 0 bear-case 105 beginning- 2009end-2009peak (mar/apr 2010)currentend-2011e note: (1) price change are all base on prior years average level. comparing with current levels, we expect

23、a 10%-20% decline from now until end-2011e. ytd, prices have fallen 0%-10% from peak levels in march/april but below our previous estimate of 25%-30%. we now push back price decline to 2011. (2) the volume assumption is for the market, for our coverage universe, we estimate average 11% volume increa

24、se in 2011e, mainly driven by new project launches (or we expect our coverage universe to grow market share). for existing projects, we assume a 10%-30% volume drop or a lower sales rate from 2009-2010e but higher than 2h08. source: gao hua securities research estimates. although we assume volume gr

25、owth will increase 35% in 2011e from 2010e, we actually forecast a declining sales rate in 2011e from 2009 and 2010e levels. that said, we expect the sales rate in 2011e to be better than 2h08 given a stronger macro backdrop. volume names to be the main beneficiaries in a price-controlled environmen

26、t we believe that developers that are focused on achieving fast asset turn will be best placed in a price-controlled environment, particularly those that have exposure to cities in the key economic hubs of central and western china, have a more appealing brand/product, and a strong financial positio

27、n. we believe those developers are most likely to outperform margin names in the years ahead, in terms of earnings growth. right regions: coastal cities with supply overhang may encounter more consolidation, in our view. our preferred geographical focus is central and western china. we reiterate our

28、 view that we expect coastal cities property markets to be more volatile, given increased policy intervention recently, as a result of there being a higher percentage of multiple property purchases/investment/speculation in these areas. conversely, and as highlighted in our report dated june 24, 201

29、0, “short-term pain, long-term gain (part 2); goldman sachs global investment research 4 october 21, 2010china: real estate developers prefer evergrande, vanke a”), we feel there is more volume growth potential to be had in central and western china. brand/product: with restrictions of additional pr

30、operty unit purchases now in place in a couple of cities (we expect other coastal cities to follow suit), we believe competition between developers on prospective homebuyers along coastal areas, which accounts for about an average of 60% of our coverage universes 2011e contract sales, is likely to i

31、ntensify substantially. as a consequence, we believe product competitiveness and brand recognition are crucial for developers (with exposure to coastal areas) if they are to maintain their sales performance. balance sheet strength: being disciplined when it comes to managing cash flow becomes more i

32、mportant for homebuilders amidst policy tightening cycles and prolonged industry slowdown. we think developers with fast asset turnover, low-cost land bank/disciplined new land acquisitions are more likely to maintain a healthy balance sheet and become potential industry consolidators. exhibit 2: ou

33、r top picks are evergrande and vanke (a) among our offshore and onshore coverage, respectively scorecard of our coverage universe (see appendix i for quantitative analysis to derive our scorecard) companykey themes (60% weighting)other (40% weighting)total score rank tp product/brand2011e2011e disco

34、untremark regionalappeal in localfinancialcontract salesearnings to nav focusmarketpositiondiversification lock-in ratio margin trend off-shore coverage evergrande fantasia crl coli soho china country garden agile poly hk franshion sino ocean kwg yanlord shimao shui on land forte r 4: above average;

35、 3: average; 2: weaker; 1: worst. source: gao hua securities research estimates. goldman sachs global investment research goldmansachsglobalinvestmentresearch 5 exhibit 3: evergrande, vanke (a) remain our top buys. we upgrade country garden, sino-ocean to buy; forte to neutral; remove szi from our c

36、onviction sell list but retain our sell rating on the stock; downgrade powerlong to neutral comparative valuation table eps companyticker mkt price as of potentialtarget end-11e existingshare price bear-case valuation fd core p/e (x) growth (%) cap12 mthupside/pricenav per(disc)/premimplied (us$pric

37、edownsidedisc. toshareto end-11e bear-case upside/(downsi 09a - bn)rating 19/oct/10 target(%)nav(lcy)nav (%)valuationde) (%) 10e11e12e 12e hong kong listed agile property china overseas land china resources land country garden evergrande fantasia franshion greentown china guangzhou r 30% volume decr

38、ease in 2010e from 2009 level and followed by 35% yoy volume increase in 2011e; bear-case: we assume a 30% reduction in property price from end-2009 level and a 50% fall in volume in 2010e over 2009. we assume both volume and price will remain flat from 2010 levels thereafter. for important disclosu

39、res, please go to http:/ source: datastream, company data, gao hua securities research estimates. 6 october 21, 2010china: real estate developers fine tune our forecasts; rollover nav-based tps to end-2011e exhibit 4: we revise our 2010e-2012e underlying profit forecast by 9%/15%/12% on average repo

40、rtingnet profit forecast (mn)underlying profit forecast (mn) currency newoldchange (%)newoldchange (%) 10e11e12e10e11e12e10e11e12e10e11e12e10e11e12e10e11e12e agile(rmb)5,0823,3333,9902,4362,6273,09610927292,7653,3333,9902,4362,6273,096132729 coli(hk$)9,570 10,76310,72810,0009,15611,473-418-69,57010,

41、76310,72810,0009,15611,473-418-6 crl country garden evergrande fantasia franshion greentown guangzhou r sell ifm we upgrade country garden and sino-ocean to buy; forte to neutral; remove szi from our conviction sell list but maintain our sell rating on the stock; downgrade powerlong to neutral; reta

42、in our buy ratings on evergrande (on buy cl) , agile, crl, poly hk; vanke a/b (a is on buy, cl), poly, gemdale, and fantasia. evergrande, and vanke a remain our top buys (on buy, cl); retain our sell ratings on greentown, oct, cwtc, and ifm. ifm is our top sell (on sell, cl). key risks: upside: stro

43、nger-than-expected volume growth; potential m b) sufficent gfa available for sale due to its high asset turnover business model; and c) a flexible pricing strategy with limited competetion. (2) frequent nav- accretive land acquistion on the back of country gardens ability to provide large-scale proj

44、ects in lower tier cities. (3) we believe investors current policy concerns should be potential property tax trial-run in shanghai and chongqing. we believe country garden could be less affected than other developers as it has nil our 12-month target price is set at a 30% discount (previously 40%) t

45、o 2011e nav of hk$4.99, which implies 10.5x 2011e p/e. the change in the discount is mainly because we are becoming more positive on the stock based on its better-than- peers scorecards. the stock is trading at a 43% discount to 2011e nav and 10.5x 2011e p/e, vs. its peers at 46% and 12.6x, respecti

46、vely. nav exposure there. our 12-month target price is set at a 30% discount we remain positive on agile mainly on the back of: (1) its low land cost advantage (18% of 2010e asp vs. peers 25%) offers better-than-peers margin and earnings outlook. (2) its high nav exposure (69%) to tier-2 and tier-3

47、cities provides it with better than peers advantage for contract sales performance given less policy risk. we are confident of our forecasts of rmb5.2bn/rmb4.2bn/ rmb4.6bn contract sales in 2010e-2012e for the project, respectively. ytd the company has achieved rmb4.7bn for the project. (1) stronger

48、-than-expected monthly contract sales on the back of its healthier-than-peers gfa exposure, such as the projects in chengdu, xian, and chongqing. (2) we believe investors current policy concerns relate to a potential property tax trial-run in shanghai and chongqing. we believe agile could be a poten

49、tial relative outperformer as it only has small nav exposure there. to 2011e nav of hk$20.86, which implies 12.5x 2011e p/e. the change in the discount is mainly because we are becoming more positive on the stock based on its better-than-peers scorecards. the stock is trading at a 49% discount to 20

50、11e nav and 9.0x 2011e p/e, vs. its peers at 46% and 12.6x, respectively. 600048.ss we like poly mainly because of the following advantages: (1) its high 76% gfa exposure to non tier-1 cities provides the company with better than peers contract sales performance outlook due to less policy risk. (2)

51、its business model pursues high asset turnover, which could help reduce expansion risk amid current frequent policy tightening measures. (3) its high estimated 2011e revenue lock-in ratio (75% vs. peers 41%) as of september 2010e provides the best earnings visibility among its peers. (4) its attract

52、ive valuation at only 10x 2011e p/e, vs. a-share peers 13x. (1) stronger-than-expected monthly contract sales on the back of aggressive project launches and healthier-than-peers gfa exposure. we are expecting its 2010e contract sales to reach rmb55bn, higher than market consensus at about rmb45-50bn

53、. (2) earnings revisions from the street, given that our 2010e/2011e eps are 3%/12% ahead of wind consensus. (3) better accessibility to credit due to its state-owned background given increasing credit tightening. our 12-month target price is set at a 30% discount to 2011e nav of rmb27.14, which imp

54、lies 13.1x 2011e p/e. the stock is trading at a 44% discount to 2011e nav and 10.4x 2011e p/e, vs. its peers at 45% and 13.2x, respectively. gemdale remains on our buy list mainly due to: (1) its strong gfa starts in 2010 (2010e at 4mn sqm vs. 2009 at 1.7mn sqm) could bring sufficient gfa available

55、for sale over the next few quarters, which could drive upcoming contract sales to outperform peers. (2) we believe the (1) stronger-than-expected monthly contract sales on the back of aggressive project launches. we are expecting rmb22bn contract our 12-month target price is set at a 40% discount to

56、 2011e nav of rmb15.00, which implies 12.5x gemdale600383.ssshare price already prices in some investor concerns over the changes in the companys mangement team earlier this year. we believe investor confidence is returning following recent strong property sales. (3) we continue to like gemdales str

57、ong brand name, stronger-than- sales in 2010e, above market expectations at about rmb20bn. (2) earnings revisions from the street, given that our 2010e/2011e eps are 3%/8% ahead of wind consensus. 2011e p/e. the stock is trading at a 51% discount to 2011e nav and 10.1x 2011e p/e, vs. its peers at 45

58、% and 13.2x, respectively. peers product design ability, and focus on fast asset turnover. (1) after many years of improving its product quality, we believe crls products are now very competitive, capable of attracting prospect buyers in the cities it has exposure to. (2) although 1109.hk its contra

59、ct sales performance in the first 3qs (about rmb14bn) has lagged its peers, we expect the company to catch up later this year and 2011 on the back of about 20 new projects (including 5 new markets for the company) to be launched for sale, for which the company is more flexible and better able to set pricing to meet the needs of homebuyers. we also estimate that beijing, shanghai, shenzhen, and hangzhou cities in which the government has announced home purchase restrictions will only account for 30% of our 2011e contract sales. (3) we estimate that crl has already locked in 63% of our 2011e