20140313-DBS_Group-Internal_control_is_now_a_priority_18页_263kb

报告摘要

Country Garden (2007 HK) Research Summary

Core Content

This report provides an update on the financial performance and future outlook of Country Garden (2007 HK), focusing on its earnings revision, presales growth, and strategic shift toward internal efficiency and cost control. The report also includes valuation metrics, sales performance, and comparisons with other developers in the real estate sector.

Main Points

Price Target and Recommendation

Price Target: Revised to HK$6.22 (from HK$6.31), with a BUY recommendation.
Earnings Revision: Estimates are slightly below the consensus, with a revised FY14/15F EPS/NAV down by 1% each due to lower margin assumptions and higher GFA delivery.

Presales Growth

Presales Growth Guidance: Management revised its 2014 presales growth target to 20%, down from 30% previously.
Reason for Change: The focus is shifting from market share gain to operating efficiency and quality control.
Upside Potential: Despite the conservative guidance, presales could exceed expectations due to a 32% increase in saleable resources and a 60% sell-through rate.
Actual Performance: Presales in 2013 grew >100% to Rmb25bn, with new launches in Guangdong Wuhua and Fujian Sanmin City achieving ~90% sell-through within one month.

Gross Margin (GPM)

GPM for 2013: 30%, lower than the estimated 35%.
Reason for Decline: Higher proportion of high-rise apartment sales (65% of development revenue), which have a lower GPM.
Future Outlook: GPM is expected to stabilize at 30% in 2014 due to increased capitalization rate and product mix.

Earnings and Profitability

Reported Earnings: Grew 24% y-o-y to Rmb8.5bn.
Core Earnings: Increased 5% above forecast to Rmb8.1bn, aligning with consensus.
EPS Growth: 23% to Rmb0.47 (RMB) and 19% to Rmb0.44 (RMB).
Core Net Profit Margin: Decreased by 3ppts to 13%.

Cash Flow Management

Cash Collection: Dropped from 82% in 2012 to 73% in 2013, attributed to a slower pace of cash collection.
Cash on Hand: Increased by 58% to Rmb26.7bn.
Target for 2014: Achieve positive operating cash flow.
Land Acquisitions: 34% of presales spent on land, showing good discipline.

Debt and Capital Structure

Net Gearing: Rose to 64% in FY13 from 54% in FY12.
Debt Maturity: Management aims to keep the net debt ratio below 75%.
Undrawn Banking Facilities: Rmb36bn available for further use.
Average Funding Cost: Improved from 9.56% to 8.54%.

Construction and Development

GFA Under Construction: Expected to increase 18% y-o-y.
New Starts: Projected to be 17.0m sm, down from 27.1m sm in 2013.
Delivery: Expected to be 11.0m sm, with 150K units to be delivered in 2014.
Construction Plan: Launch schedule remains 20%/20%/30%/30% for Q1–Q4 2014.

Valuation Metrics

PE (2014F): 5.8x, compared to 5.2x in 2011.
P/Book Value (2014F): 1.0x, indicating a potential value upside.
Dividend Yield (2014F): 7.8%, up from 5.3% in previous years.
ROE (2014F): 22.6%, showing strong returns.

Outlook and Strategic Shift

Internal Control: Now a key priority, with cost reduction and cash collection as new KPIs.
Overseas Expansion: Progressing, with a 30% long-term target for overseas revenue.
Acquisitions: Potential to boost saleable resources and growth in 2014.

Key Financial Highlights

Metric	FY12A	FY13A	FY14F	FY15F
Turnover (RMB m)	41,891	62,682	80,320	95,469
EBITDA (RMB m)	12,115	12,960	17,155	19,596
Pretax Profit (RMB m)	11,542	13,473	16,935	19,377
Net Profit (RMB m)	6,853	8,514	9,961	12,244
Core Profit (RMB m)	6,726	8,081	9,961	12,244
EPS (RMB)	0.38	0.47	0.55	0.67
EPS (HK$)	0.48	0.59	0.69	0.85
EPS Growth (%)	14.3	22.6	17.0	22.9
PE (x)	8.3	6.7	5.8	4.7
P/Cash Flow (x)	(22.8)	2.5	2.7	3.7
EV/EBITDA (x)	6.2	6.6	5.3	4.8
DPS (HK$)	0.18	0.21	0.25	0.31
Div Yield (%)	4.4	5.3	6.3	7.8
Net Gearing (%)	51.6	64.3	68.8	63.4
ROE (%)	20.6	20.9	21.1	22.6
Book Value (HK$)	2.64	3.04	3.48	4.02
P/Book Value (x)	1.5	1.3	1.1	1.0

Outlook Comparison

Company	Recom	12-Month Target (HK$)	EPS Growth (%)	PE (x)	P/Book (x)	Div Yield (%)	ROE (%)	Gearing (%)
Country Garden	BUY	6.22	17/23	5.8	1.0	7.8	21.1	63.4
China Overseas	BUY	29.84	13/32	7.2	1.6	2.7	19.8	14.9
CR Land	BUY	25.77	22/19	9.1	1.3	2.7	13.0	38.2
Evergrande	BUY	4.32	(3)/19	4.0	0.9	6.2	18.9	58.4
Longfor	NR	n.a.	16/22	5.6	1.3	3.7	18.5	59.4
Shimao Property	BUY	22.85	30/22	5.5	1.0	5.1	16.8	60.8
Country Garden	BUY	6.22	17/23	5.8	1.0	7.8	21.1	63.4
Sino-Ocean Land	Hold	4.54	19/22	6.9	0.5	5.1	8.7	48.7
Yuexiu Property	BUY	2.13	37/16	5.7	0.5	7.0	8.2	54.5

Summary of Key Factors

Presales Growth: Expected to be >30% despite conservative guidance.
GPM: Stabilized at 30% in 2014, lower than previous estimates.
EPS Growth: >20% in the near to mid-term.
Valuation: Attractive PE of 5.8x, compared to 5.2x in 2011.
Dividend Yield: 7.8%, increasing over time.
Debt Management: Net gearing at 64%, with efforts to keep it below 75%.
Strategic Shift: Emphasis on internal efficiency and cost control.
Overseas Projects: Danga Bay, Diamond City, and Sydney are key projects with Rmb12.2bn in saleable resources for 2014.

Conclusion

Country Garden is maintaining its BUY recommendation due to its attractive valuation and potential for earnings growth, despite a shift in focus from rapid expansion to operational efficiency. The company's dividend yield, ROE, and growth outlook support its investment appeal.

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