20140523-Maybank_KERPL-Sizeable_deal__Ambitious_vision_12页_622kb

报告摘要

Summary of Sunac China (1918 HK) Analysis

Core Content

Sunac China has announced the acquisition of a 24.31% stake in Greentown for HKD6.3 billion, which is HKD12 per share. This represents a 56% premium to the previous closing price of HKD7.69 and a 49% premium after accounting for the final dividend of HKD0.54 per share. The transaction is expected to be completed within one to two months, and the acquisition is seen as having strategic value, especially with the potential for further stake increase and synergies.

Main Points

Acquisition Details:
- Stake: 24.31%
- Price: HKD6.3 billion
- Premium: 56% (to closing price), 49% (adjusted for dividend)
- Added landbank: ~5.2 million sq m (attributable), with an average land cost of CNY2,799/sq m as of end-2013
- Management changes: Sun Hongbin (Sunac's founder and Chairman) becomes co-Chairman of Greentown; Huang (Sunac's CFO) becomes executive director and GM of Greentown; Song will be redesignated as honorary Chairman from March 1, 2015
Financial Impact:
- Based on Bloomberg consensus earnings for Greentown, the acquisition is expected to add over CNY1 billion of net profit to Sunac in FY14
- Sunac revised its FY2014–2016 earnings estimates to incorporate Greentown's performance
Valuation and Price Analysis:
- The acquisition price is 0.7x 2014 P/B, which is not cheap but acceptable
- The China property sector valuation is 5x 2014 PER and 0.7x 2014 P/B
- Sunac's target price is HKD5.92, representing a 68% increase from the current share price of HKD3.52
Market Performance:
- Share price performance for the past 1 month: -18.9%
- Relative to index: -19.7%
- 12-month performance: -39.4%
- Net dividend yield: Expected to increase to 10.5% by FY16

Key Questions for Investors

Impact on Gearing: Sunac's net debt/total equity guidance remains <=90% for end-2014, which is acceptable.
Role of Greentown's Management: Existing Chairman Song and CEO Shou will see their stakes reduced, and there is a possibility that Sunac will increase its stake in the future.
Management Influence: Sunac's management is expected to exert greater influence on Greentown's strategy and execution, potentially leading to improved performance.
Advantages of Acquisition: Sunac's strategic focus on Tier 1 and Tier 2 cities could enhance Greentown's brand leverage and sales execution.

Key Financial Metrics

Metric	FY12A	FY13A	FY14E	FY15E	FY16E
Revenue (CNY m)	20,842.6	30,836.7	34,947.7	41,143.9	47,475.5
EBITDA (CNY m)	4,666.8	6,030.4	6,887.9	9,076.1	11,243.9
Core Net Profit (CNY m)	2,591.9	3,082.2	5,373.7	6,764.0	7,636.3
Core FDEPS (CNY)	0.85	0.92	1.59	2.00	2.25
Net DPS (CNY)	0.08	0.19	0.23	0.28	0.30
Core FD P/E (x)	3.3	3.1	1.8	1.4	1.3
P/BV (x)	0.9	0.7	0.5	0.4	0.3
Net Dividend Yield (%)	2.8	6.7	8.0	10.1	10.5
ROAE (%)	26.7	20.4	25.6	24.7	21.6
ROAA (%)	5.0	3.7	5.1	5.5	5.7
EV/EBITDA (x)	5.7	4.9	4.5	3.8	3.7
Net Debt/Equity (%)	99.7	93.3	86.8	76.1	74.7

Key Risks

Worse-than-expected property market
Project slippages
Higher-than-expected gearing

Valuation

Current share price: HKD3.52
Target price: HKD5.92 (+68%)
Market Cap (USD): 1.5B
ADTV (USD): 7M
Discount to NAV: Over 60%
Book value (2015F): 0.4x

Stakeholder Breakdown

Shareholder	Before Acquisition	After Acquisition
Mr Song	21.87%	10.47%
Mr Shou	17.81%	8.09%
Ms Xia	3.19%	0%
Wharf	24.31%	24.31%
Sunac China	-	24.31%
Directors	5.235%	5.235%
Public Shareholders	27.580%	27.580%

Share Price Performance

Period	Absolute (%)	Relative to Index (%)
1 Month	-18.9	-19.7
3 Months	-23.3	-24.6
12 Months	-39.4	-38.6

Conclusion

Sunac China maintains a BUY rating with a target price of HKD5.92, which is 45% discount to NAV estimate of HKD10.76/share. Despite the purchase price being relatively high, the strategic benefits and potential for further stake increase make it a compelling investment. However, investors should be mindful of the risks associated with the property market and the company's gearing.

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