CHINAREALESTATESTAYINGPOWER0131

1、nnfinancial institutions groupchina real estate rerating to continue, fuelled by reignitedabcglobal researchderek kwong*analystthe hongkong and shanghai bankingchina real estatestaying powervaluation summarybbg share hsbc tp (disc)/prem _ core pe _company ticker price rating to nav fy12e fy13e(hkd)

2、(hkd) (%) (x) (x)growth expectations modest asp increase and narrowerdiscount to nav to drive sector valuation conviction picks: coli, longfor, shimaoimproving risk profile driving further sector rerating. we expect thesector to continue rerating after a strong performance in 2012, as a stablepolicy

3、 environment, easier access to funding and more promising contractedcorporation limited+852 2996 .hkmichelle kwok*analystthe hongkong and shanghai bankingcorporation limited+852 2996 .hkstanley cheung*analystthe hongkong and shanghai bankingcorporation limitedagilecolicrlcgfranshiongz r&fkwglong

4、forshimaoshui on landsino oceansohoyanlord*3383 hk688 hk1109 hk2007 hk817 hk2777 hk1813 hk960 hk813 hk272 hk3377 hk410 hkyllg sp11.02.813.95.914.416.01.6ow(v)owowow(v)owow(v)ow(v)owow(v)nn(v)13.830.628.04.73.618.47.319.47.11.8(49)(13)(15)(22)(57)(43)(67)(44)(35)(64)(37)

5、(39)(40)9.312.08.04.012.09.918.516.79.016.06.49.98.010.813.08.312.5sales growth prospects in 2013e improve the risk profile.pricing power to return in affluent regions. we believe the operatingenvironment has markedly improved since 2h12, as genuine buyers havegiven up

6、 the waiting game, leading to a clearance of inventory in majorcities. in our view, there will be a gradual return of pricing power in first- andsecond-tier cities, which bodes well for listed developers.modest price growth to drive up navs and tps. we expect first- andsecond-tier residential and co

7、mmercial prices to grow by 10% y-o-y in 2013,+852 2822 .hkruth leung*associatethe hongkong and shanghai bankingcorporation limited+852 3941 .hkganesh siva*associate, bangaloreview hsbc global research at:http:/source: bloomberg, hsbc estimates. prices as of close of 25 jan 2013. *sgd30 january 2013r

8、esulting in a 12% increase in forward nav. we believe improvedprospects for growth will drive a narrowing of the discount to nav backto 2010 levels. we raise our target prices by an average of 32%.conviction picks: coli, longfor and shimao. based on our scorecardanalysis, coli and longfor lead the s

9、ector based on measures including assetturn, sales execution and balance sheet strength. we expect coli to continueto outshine others in terms of sales execution and cost of capital advantage.longfor will embark on its next stage of growth after its mega acquisitionsand equity fundraising in 2012. w

10、e believe shimao will continue to deliverstrong contracted sales and organically deleverage, enabling it to take onmore growth opportunities. we upgrade crl to ow from n(v) and shimaoto ow(v) from n(v), and downgrade sino ocean to n(v) from ow(v).*employed by a non-us affiliate ofhsbc securities (us

11、a) inc, and is notregistered /qualified pursuant to finraregulations.issuer of report: the hongkong andshanghai bankingcorporation limiteddisclaimer &disclosuresthis report must be readwith the disclosures andthe analyst certifications inthe disclosure appendix,and with the disclaimer,which form

12、s part of it6425724767928financial institutions group30 january 2013contentsabcstill another leg upcomprehensive evaluation ratings and risksfinancials and valuation36weighted scorecardnav and target discountadjustmentsearnings estimate revisionsthe great balancing act 1520appendixkey company statis

13、ticskey property sector statisticsdisclosure appendixdisclaimer5664acquisition vs. balance sheetreality check on the physicalmarket32with this report, derek kwong assumes coverage of sinoocean and stanley cheung assumes coverage of yanlord.2shuionlandfranshionyanlordshimaolongforkwgr&fcgsohocoli

14、agilecrl3financial institutions group30 january 2013key chartsabcmarket share of key developers*developers net gearing (ex-restricted cash) and cash levelweighted cost of debt, as of december 201216%14%12%10%8%6%4%8.9%5.0%8.9%5.3%11.6%7.0%12.4%8.0%13.6%9.0%12010080604020(rmb bn)(%)100%80%60%40%20%12

15、%9%6%3%0%2%00%20082009spread2010top 1220112012top 52005 2006 2007 2008 2009 2010 1h112011 1h12cash -ex.restricted (lhs)net gearing (rhs)*top 12 key developers include agile, coli, crl, country garden, evergrande,gemdale, gzrf, kwg, longfor, poly (a share), shimao, vanke*top 5 developers are the comp

16、anies (among top 12) with best selling performance ofthe corresponding yearsource: company data. ceicnav discount chart60%40%20%0%-20%-40%-60%-80%source: company data, hsbcpb chart54321source: hsbc estimatespe chart60504030201020072008 2009% to navmean201020112012+1 sd-1 sd09799010305070911097990103

17、0507091113source: company data, hsbc estimatesnote: simple averagesource: company data, hsbc estimatessource: company data, hsbc estimatesoldcompany4financial institutions group30 january 2013changes in ratings, navs and target prices (share price as of 25 january 2013)abcrating _ forward nav _ targ

18、et discount _ _ target price _new old new %chg old new %chg old new %chgpotentialreturn*implied pefy13e share priceagilecolicrlcgfranshionr&fkwglongforshimaoshui on landsino oceansohoyanlordow (v)ow (v)n (v)ow (v)ow (v)ow (v)ow (v)ow (v)n (v)n (v)ow (v)n (v)n (v)ow (v)owowow (v)owow (v)ow (v)owo

19、w (v)nn (v)nn19.025.124.04.65.821.515.423.410.52.421.627.826.75.06.524.517.725.824.610.29.911.52.714%11%11%9%12%14%15%10%13%16%13%10%11%-45%-5%-13%-18%-50%-45%-65%-30%-38%-65%-39%-53%-43%-36%10%5%-6%-45%-25%-59%-25%-14%-62%-35%-38%-35%9%15%18%12%5%20%6%5%24%3%4%15%8%10.423.911.85

20、.416.45.01.4013.830.628.04.73.618.47.319.47.11.833%28%35%27%23%56%34%18%57%25%19%43%26%29.628.124.523.728.537.528.035.913.116.910.311.410.210.910.910.314.011.02.813.95.914.416.01.63simple average12%11%33%11.4* potential return equ

21、als the percentage difference between the current share price and the target price, plus the forecast dividend yieldsource: hsbc estimateschanges in core eps (rmb), 2012-14e_ 2012e _ _ 2013e _ _ 2014e _old new %chg old new %chg old new %chgagilecoli*crl*cgfranshion*gz r&fkwglongforshimaoshui on

22、landsino oceansohoyanlord1.391.981.400.350.281.460.761.031.520.290.300.750.541.311.981.390.360.241.460.731.021.370.170.320.650.52-6%0%0%2%-16%0%-5%-2%-10%-41%3%-13%-4%1.472.351.660.400.321.540.891.201.850.320.370.620.631.352.441.680.410.311.600.821.171.700.290.410.710.66-8%4%2%3%-3%4%-7%-3%-8%-9%9%1

23、5%4%1.632.901.990.450.381.741.021.392.120.360.470.530.721.543.042.140.460.421.850.951.361.950.420.500.550.72-6%5%8%2%10%7%-6%-2%-8%17%5%3%0%simple average-7%0%3%*hkdsource: hsbc estimates5financial institutions group30 january 2013valuation summary: china developers (share price as of 25 january 201

24、3)abccompanybbghsbc share price target pricediff to tpmkt cap12m nav (disc)/prem _ core pe (x) _yield (%)pb (x)tickerrating(hkd)(hkd)(%)(hkdbn)(hkd/sh)(%)fy12efy13efy12efy12echina propsagilecolicr landcountry gardenfranshion propertiesguangzhou r&fkwg propertylongfor propertiesshimao propertyshu

25、i on landsino ocean landsoho chinayanlord (sgd)3383 hk688 hk1109 hk2007 hk817 hk2777 hk1813 hk960 hk813 hk272 hk3377 hk410 hkyllg spow (v)owowow (v)owow (v)ow (v)owow (v)nn (v)nn11.02.813.95.914.416.01.613.830.628.04.73.618.47.319.47.11.826262320283324353363273819812570

26、2645177656193636321.627.826.75.06.524.517.725.824.610.29.911.52.7(49)(13)(15)(22)(57)(43)(67)(44)(35)(64)(37)(39)(40)9.312.08.04.012.09.918.516.79.016.06.49.98.010.813.08.31.54.01.0* for champion

27、reit, link reit & hui xian reit, core pe refers to pe/distribution (x) and yield refers to dpu yield.note: ow = overweight; n = neutral; uw = underweight; v = volatile.source: bloomberg, hsbc estimatescontracted sales analysiscompanydec-12sales valuechange insales valuechange insales value2012sa

28、les valuechange insales valuedec-12vs. 2012 1qdec-12vs. 2011 2hdec-12vs. 2012 ytd2012 targetsales value2012 targetsalesytdas ofrmb mm-o-my-o-yrmb my-o-y monthly average monthly average monthly averagermb m% achievedagile*coli*cr land*country garden*evergrandegz r&f*kwg*longfor*shimao*sino ocean*

29、vanke6,0104,6886,1805,5107,6903,0011,0174,2703,8101,84014,07087%8%49%-10%-35%9%-12%9%25%-16%-19%72%2%6%45%501%-1%85%63%70%-41%142%33,07092,89952,19047,60092,32032,19812,20140,13046,09731,006141,4005%28%45%10%15%10%7%5%50%15%16%183%-35%126%170%179%36%50%96%56%69%36%128%-3%65%52%21%13%24%28%39%-25%49%

30、118%-39%42%39%0%12%0%28%-1%-29%19%31,50083,30040,00043,00080,00032,00012,00039,00040,00027,000120,000105%112%130%111%115%101%102%103%115%115%118%decdecdecdecdecdecdecdecdecdecdecaverage7%75%18%86%31%13%112%* company under coveragesource: company data, hsbc estimatesfinancial institutions group30 jan

31、uary 2013still another leg up further rerating expected in 2013, as stable policy environment, accommodating offshore debt marketand expectation of contracted sales growth create an environment of lower risk for most stocks, we expect valuation to revert back to mean, while selective outperformers t

32、rade at apremium. our key picks are coli, longfor and shimao we believe it is imperative that developers strike a prudent balance between land acquisition and cashflow management in 2013abcstill positivein our view, growth expectation and a stablemacro and policy backdrop will fuel a further re-rati

33、ng in sector valuations in 2013 to levelssimilar to 2010. while share prices in our universeof china property stocks have gone up by 82%since january 2012 (significantly outperformingmsci china, which was up 24% in the sameperiod), we expect more upside as investors lookpast the negatives of the pas

34、t two years. our viewis backed by strong evidence of a broad physicalmarket recovery, which became more apparent in2h12. we believe market sentiment will continueto be underpinned by expectations of decentcontracted sales growth in 2013e, a revival indevelopers investment appetite and a stabilizingp

35、olicy environment. the upcoming marchearnings season will be important in validatingthese expectations.over the course of 2013, we expect to see a modestreturn of pricing power, particularly in first-tiercities and provincial capitals. we are raising thetarget prices for our coverage to reflect an a

36、spincrease of 10% for residential and commercialassets in first- and second-tier cities in 2013, andnarrower target discounts to navs. based on ournew target prices, we project market cap weightedupside potential of 22% for our coverage universe.rating changes: we upgrade crl to overweight(remove th

37、e volatility flag) from neutral (v),shimao to overweight (v) from neutral (v) butdowngrade sino ocean to neutral (v) fromoverweight (v). the ratings of other stocks areunchanged. among the 13 china stocks under ourcoverage, nine are rated overweight and fourneutral.building in more constructiveprici

38、ng assumptionsfollowing a 9% decrease in asp in 2012,developers have started to raise prices modestly,while maintaining a healthy contracted sales runrate. we expect first- and second-tier residentialand commercial prices nationwide to grow by 10%y-o-y in 2013, but maintain our assumption thatasp in

39、 third-tier cities will be flat. our pricegrowth forecast largely tracks our chinaeconomists forecast that gdp will grow 8.6% in2013 in real terms. this is consistent with thecentral governments intent to maintain home pricegrowth in line with local gdp growth trends. inour view, asp growth level is

40、 constrained at these62010n/a101074520111315111917312012111010228829142518201215191084951119151099financial institutions group30 january 2013abclevels as more exuberant price movements areeconomically affluent regions; hence our beliefasp growth vs nominal gdp growthlikely to be met with more string

41、entimplementation of existing policies and potentialrisk of introduction of more regulatory constraints.residential price trendthat asp will at best be flat in 2013.property price assumption for coming 12 monthsresidential price previous new assumptionassumptionbeijingshanghaijiangsuzhejiang2012 asp

42、growth7%3%6%10%2012 gdpgrowth10%5%10%7%2013 gdpgrowth target8%10%10%8%7,0006,0005,0004,000(rmb/sqm)tier-1 citytier-2 citytier-3 cityretail/officesource: hsbc estimatesflatflatflatflat10%10%flat10%guangdonghainanjilinheilongjianganhuijiangxihenan0%-13%-8%1%3%16%13%10%11%13%7%12%11%9%8%10%12%11%10%10%

43、10%3,0002,0001,00001998 2000 2002 2004 2006 2008 2010 2012source: ceicaverage inventory-month at year end2008 2009beijing 18 7shanghai* 13 3tianjin n/a n/achongqing# 12 5shenzhen 12 9guangzhou n/a 6hubei 13% 13% 10%yunnan 14% 16% 12%shanxi 2% 16% 10%ningxia 7% 11% 12%average 10%source: ceic, soufun,

44、 local government websites, hsbc estimateremarks: 1) 2012 implied asp is based on the residential sales value and sales volume byprovince2) 2012 gdp growth is based on the nominal change in absolute gdp value by provincethe return of pricing power and a noticeabledecline in inventory levels in major

45、 cities in 2012,in our view, indicates that homebuyers haveadapted to the home purchase restrictions (hpr)environment and stopped waiting afterhangzhou*nanjinwuhanchengdudalianxiamenchangshaqingdaon/a1537n/an/an/an/a17n/a212n/an/a7n/a5n/a613610what triggered the initialrerating?in 1h12, the sectors

46、rebound was led by small-and mid-cap beta plays trading at distresseddevelopers sensible downward adjustment inasps. in our view, first- and second-tier citiesshould be the prime beneficiary of continuedeconomic growth and wealth creation, along withbetter demand and supply dynamics.we note that fir

47、st- and second-tier cities on theeast coast saw the greatest improvement,reversing the bulk of the stock piling in 2011. onthe other hand, the improvement in lower-tiercities is still lagging the scale of the moresource: creis, hsbc estimate*data from commodity residential properties (excluding publ

48、ic housing)#data from commodity housing1. based on commodity residential properties (unless stated otherwise)2. based on the inventory as of end-december divided by the average monthly transactionvolume of 4q2.valuation amid the reserve requirement ratio(rrr) cuts and expectations of further policyr

49、elaxation, while the 2h12 rally reflectedimprovement in market fundamentals on the backof strong contracted sales performance, which ledto optimism over a resumption of growth in 2013.moreover, a stable policy environment amid asmooth leadership transition in november lastyear, and the governments s

50、ubsequent emphasison the quality and efficiency of economic growth,along with urbanization being an important driver7498185221285338544691559853931financial institutions group30 january 2013of domestic spending, have further helpednet gearing 1h09 to 1h12 (as reported)abcimprove market sentiment. la

51、st but not least, an1h09fy091h10fy101h11fy111h12accommodating offshore debt market sincenovember 2012 has boosted investors confidencein developers ability to raise funds. combined,these factors have driven a narrowing in thesectors average nav discount from 54% at theend of 2011 to 40% currently.wh

52、ile the broader liquidity-driven rally in equitymarkets may have played a part in lifting thesector, we think the sectors outperformance isshimaoagileevergrandec-gardensino oceanyanlordcolicr landfranshiongz r&fkwglongforshui on landsohoaverage44%22%na36%34%9%13%20%39%110%65%na18%-36%37%52%40%52

53、%53%14%4%22%21%48%98%48%20%23%-13%38%75%61%43%48%68%19%48%46%47%105%43%53%32%-34%53%68%50%53%48%46%34%23%51%18%94%48%44%44%-57%48%75%60%75%67%47%45%39%68%40%89%61%57%65%-20%61%82%62%69%63%60%52%33%68%41%86%62%43%65%-10%60%68%67%96%58%62%46%32%66%47%85%71%49%75%20%60%largely driven by industry-specif

54、ic factors, inparticularly alleviated concerns over a hardsource: company datalanding for chinas property market. from lateannual transaction amount, gfa and aspto medium term as the government needs time to2011, price cuts by developers effectively put anend to homebuyers wait-and-see mentality,rmb

55、 bn gfa (m sqm)asp(rmb/sqm)iron out a feasible plan for the formal introductionof property tax among other long-term structuralbringing genuine demand back into the market,most notably in the more affluent cities. nationalprimary sales in 2012 amounted to a total 985msqm gfa, up 1% y-o-y, despite th

56、e ongoingconstraints of hpr.20012002200320042005200620072008200920103834716308621,4991,7042,5322,0423,8164,3952,0682,1302,2122,5493,0103,1323,6653,6554,4744,724issues. recent news article from guandian claimedthat a senior tax official acknowledged that anintroduction of property taxes might take lo

57、nger-than-expected to implement nationwide, given theneed to build a proper information system andpossibly wider public consultation. the key20112012source: ceic4,8625,3479709855,0115,430consideration is that homebuyers are no longerstaying away from the market in anticipation ofpolicy changes. like

58、wise, we think investors are nostabilizing policy backdrop. while we think thereis little chance of a relaxation of policy for thephysical market recovery amid the revival in salesactivities and moderate rise in asp, new draconianmeasures also look unlikely. as in 2012, wecontinue to believe hpr is

59、here to stay in the nearlonger so concerned that developers growthprospects will be undermined by hpr.improvement in market fundamentals, whereinventory levels in major cities have significantlydropped in 2012. we note that sales momentum859financial institutions group30 january 2013has continued to

60、 improve in the final months of2012, along with pricing, which has also started tofirm up in selected cities. home prices in 54 of the70 key cities the government monitors rosem-o-m in december 2012, compared with 35cities in october 2012, according to the nationalbureau of statistics data. at this juncture, risk ofa renewed slowdown in m