20140619-DBS_Group-Further_policy_easing_on_the_way_18页_611kb

Summary of Document Content

Core Content

This document discusses recent policy easing in China's housing market, highlighting the gradual relaxation of purchase restrictions (HPR) and residency requirements in various cities. These changes are expected to help restore buying sentiment and support sales recovery over time. It also includes valuation insights for several real estate companies, emphasizing attractive valuations and potential investment opportunities.

Main Points

• Policy Easing: Multiple cities are relaxing housing purchase restrictions and residency policies to stimulate the market.
• Sales Recovery: While the impact may not be immediate, the easing of policies is expected to gradually boost sales and buying sentiment.
• Valuation Analysis: The sector is currently undervalued, with some companies trading at significant discounts to NAV and attractive PE ratios.
• Recommendations: Several companies are recommended as "Buy" opportunities, while others are held or not rated.

Key Information

Cities Relaxing Housing Policies

• Fuzhou: Allows local residents to purchase a third property if paid in cash.
• Nanning: Officially eased HPR policy in late-Apr, allowing residents from five nearby cities to buy property.
• Shenyang: Rumored to allow each resident to purchase a second property within the city.
• Tianjin: Expected to adjust HPR policies in 3Q14, allowing third property purchases and properties in Binhai New Area for multiple-home owners without other properties in the area.
• Wuxi and Wuhan: Lowered residency requirements for non-local buyers.

Sales Trends

• A slight increase in weekly sales was observed after the easing of housing controls in late-Apr.
• Inventory levels have decreased, and the number of weeks to digest inventory has returned to 56.

Valuation Highlights

• The sector is trading at 5.3x FY14F PE, 0.6x P/BV, and 62% discount to NAV.
• Recommended Companies: Country Garden (2007.HK), COLI (688 HK), COGO (81 HK), Shimao (813 HK).
• Valuation Table Summary:
  • Tier 1 Players: China Overseas, Country Garden, CR Land, Evergrande, Shimao Property, China Vanke.
  • Tier 2 Players: Agile Property, COGO, Greentown, Guangzhou R&F, Hopson Dev, KWG Property, Poly (Hong Kong), Shui On Land, Sino-Ocean Land, Soho China, Sunac China, Yanlord Land, Yuexiu Property.
  • Tier 3 Players: BJ Cap Land, BJ North Star, CC Land, Central China, China SCE, CIFI Holdings, Glorious Property, Kaisa Group, Lai Fung, Powerlong, Renhe Commercial, Road King, SRE Group, Yuzhou Properties, Zhong An.

Valuation Metrics

• PE Ratios: Current PE ratios are below historical averages, indicating potential undervaluation.
• Discount to NAV: The sector is currently trading at 62% discount to NAV, compared to a historical average of 9.3%.
• Average Valuation:
  • Overall Average: 5.3x FY14F PE, 4.7x FY15F PE, 4.4x 3-mth daily average PE, 3.4x 3-mth daily trough PE.
  • Tier 1 Average: 5.8x FY14F PE, 4.9x FY15F PE, 4.4x 3-mth daily average PE.
  • Tier 2 Average: 5.8x FY14F PE, 5.7x FY15F PE, 4.0x 3-mth daily average PE.
  • Tier 3 Average: 4.4x FY14F PE, 3.4x FY15F PE, 4.0x 3-mth daily average PE.

Conclusion

The housing market in China is experiencing a wave of policy easing, which is likely to support long-term sales recovery and improve sentiment. The sector is currently undervalued, with several companies offering attractive valuations and potential for growth. Investors are advised to consider companies such as Country Garden, COLI, COGO, and Shimao Property as favorable investment opportunities.