20230331-招银国际-Hopson__weaker_but_much_better_than_peers_FY22_3页_641kb

CMBI Credit Commentary Summary

Core Content

This document provides a credit commentary on Hopson (HPDLFs), focusing on its financial performance, liquidity, debt maturity profile, and investment portfolio. The report maintains a "Buy" rating on Hopson despite weaker FY22 results, citing its resilience compared to peers and attractive risk-return profile.

Main Points

1. Weaker but More Resilient FY22 Results

• Contract sales declined by 23% in FY22, which is more moderate than the 47% average decline of peers.
• Revenue dropped by 11.3%, and GFA delivered decreased by 17.9%.
• Gross profit fell by 37%, and net core profit dropped by 77.3%, reflecting the impact of COVID-19 and a weaker RMB.
• Despite this, Hopson remained profitable with a 30% gross margin in FY22, while most peers had gross margins below 10%.
• The company's focus on top-tier cities (e.g., Beijing, Guangzhou, Shanghai) and prudent expansion has helped maintain its operating performance.

2. URPs to Be Coming on Stream Helps Protect Margin

• Hopson expects 6 GZ URPs (Urban Renewal Projects) to be converted into its land bank, offering RMB212bn of saleable resources over the next 1-2 years.
• These URPs have a lower asset value (AV), which should help protect gross margins.
• The company anticipates a 25-30% gross margin for property developments in the coming years.

3. Offshore Investment Portfolio Offers Alternative Liquidity Source

• Hopson's book value of financial assets was HKD6.2bn as of Dec'22, with HKD1.5bn in current financial assets (mainly HK-listed equities) and HKD4.7bn in non-current financial assets (mainly pre-IPO and PE investments).
• It divested part of its investments due to market volatility in 2H21 and FY22.
• The market value of its listed investments (including Ping An Healthcare) is estimated at cHKD3.8bn.
• Overall, financial investments and Ping An Healthcare stakes are valued at cHKD8bn, representing a significant offshore liquidity source.
• Even after accounting for HKD1bn in margin loans, the company has a strong liquidity position.

4. Manageable Debt Maturity Profile

• Hopson's debt maturity profile is manageable, with the next offshore maturity being HPDLF 6.8 12/28/23 (USD237.5mn).
• The company applied for NDRC quota for the refinancing of this bond.
• As of Dec'22, cash on hand was RMB6.1-7.4bn (cUSD900-1.1bn), not restricted.
• It has investment properties (IPs) valued at cRMB75bn, with loans against IPs at c32% LTV.
• There is headroom of RMB20bn for additional loans if LTV is increased to industry norms (60-70%).
• Hopson's net gearing was 81.12% as of Dec'22, and unrestricted cash/short-term debt ratio was 1.0x, indicating moderate liquidity risk.

Key Information

• YTM of HPDLF'23 and '24: 18.7% and 20.5%, respectively.
• Offer prices: 92.9 and 87.0 for HPDLF'23 and '24.
• Contract sales in 1Q23: Over RMB10bn, driven by strong sales of a Shanghai URP.
• FY22 contract sales target: RMB40bn (cHKD51bn), with actual sales at RMB32.6bn.
• 3 Red Lines status: Hopson was in the Yellow camp under the 3 Red Lines, but its offshore liquidity and debt management are considered manageable.

Conclusion

Despite weaker FY22 results, Hopson is viewed as a resilient player in the sector, with a strong focus on top-tier cities and prudent financial management. Its offshore investment portfolio and manageable debt maturity profile provide alternative liquidity and operational stability. The current valuation of HPDLFs is considered attractive, and the company is seen as a survivor in the current market environment.