20180808-广发证券_香港_-A-Share_Property_Sector_2页_361kb

A-Share Property Sector Summary

Core Content

The A-Share property sector is currently trading at historically low valuations, presenting potential buying opportunities, particularly among leading developers. The sector's price-to-earnings (P/E) ratio (TTM) is at $9.9 \times$, slightly below the 2014 trough. This represents a $70%$ correction from previous highs, comparable to the adjustments seen in 2011. The current valuation of large-cap developers is down $49%$ from their previous highs, with the lowest point falling below the 2014 low.

On a forward P/E basis, leading developers are trading at $6.9 \times$ 2018E P/E, similar to the 2014 low. However, the current discount to net asset value (NAV) stands at around $38%$, a larger discount than in 2014. Hong Kong Developers, in contrast, are still trading above the 2008, 2011, and 2014 troughs.

Main Viewpoints

• Valuation Correction: The sector has undergone a significant correction, with P/E ratios and NAV discounts reaching levels not seen since 2014.
• Pessimistic Sentiment: The current discount to NAV reflects market expectations of an $8%$ drop in house prices and caution regarding developers' average selling prices (ASPs).
• Improved Fundamentals: Despite the pessimism, the current cycle shows better credit and inventory conditions compared to 2014, suggesting the recent correction may be overdone.
• Credit Policy Outlook: There are signs of a positive adjustment in credit policy, with the expectation of strategic easing that could alleviate financial burdens on developers and lead to a rebound in share prices.
• Recommendation: The report recommends monitoring undervalued first and second-tier developers, as they may present better investment opportunities.

Key Information

• Sector Valuation:
  • P/E (TTM): $9.9 \times$
  • P/E (2018E): $6.9 \times$
  • Discount to NAV: $38%$
• Historical Comparison:
  • P/E correction of $70%$ from previous highs, similar to 2011.
  • Current valuation of large-cap developers is $49%$ lower than previous highs.
  • Hong Kong Developers remain above 2014 levels.
• Market Outlook:
  • The market should focus on current fundamentals rather than previous troughs.
  • Credit and inventory conditions are better than in 2014.
  • Strategic easing in monetary and credit policy is expected to support developer share prices.
• Risks:
  • Disappointing improvement in the credit environment.
  • Tightening financing conditions.
  • Share prices being affected by falling GFA sold.

Ratings

Sector Ratings

• Positive: Sector expected to outperform the benchmark by more than 10%.
• Neutral: Expected sector relative performance ranges between -10% and 10%.
• Cautious: Sector expected to underperform the benchmark by more than 10%.

Company Ratings

• Buy: Stock expected to outperform benchmark by more than 15%.
• Accumulate: Stock expected to outperform benchmark by more than 5% but not more than 15%.
• Hold: Expected stock relative performance ranges between -5% and 5%.
• Underperform: Stock expected to underperform benchmark by more than 5%.

Analyst Certification

The research analysts certify that all views expressed in the report accurately reflect their personal opinions on the covered companies and securities, and that no part of their remuneration is tied to specific recommendations or views in the report.

Disclosure of Interests

• GF Securities (Hong Kong) and its affiliated companies do not hold shares of the securities mentioned.
• No investment banking relationships with the companies in the past 12 months.
• Analysts and their associates are not officers of the mentioned companies and have no financial interests in the securities.

Disclaimer

This report is for informational purposes only and does not constitute an offer to buy or sell securities. It is intended solely for GF Securities (Hong Kong) clients. The information may be subject to change without notice, and the report does not take into account the specific investment objectives or financial situations of any individual. Recipients should seek professional advice when necessary. GF Securities (Hong Kong) accepts no liability for any loss arising from the use of the report.