reports
Increased risk weighs on SOHO CHINA, penalising its rating down to Ne...
The independent financial analyst theScreener just lowered the general evaluation of SOHO CHINA (HK), active in the Real Estate Holding & Development industry. As regards its fundamental valuation, the title still shows 1 out of 4 possible stars. Its market behaviour, however, has slightly deteriorated and will be qualified as moderately risky moving forward. theScreener considers that these new qualifications justify an overall rating downgrade to Neutral. As of the analysis date November 12, 2...
- Phillip Zhong
Morningstar | 00410 Updated Forecasts and Estimates from 24 May 2019
Soho China reported full-year 2018 results slightly below our expectations. Rental turnover and gross profit were down 1% and 9% year on year, respectively. The margin compression was likely due to slightly lower occupancy and opening expenses. The company declared a final dividend of CNY 0.030 per share. We maintain our fair value estimate of HKD 3.40 and our no-moat rating. Operationally, the portfolio’s performance was reasonable. However, the company’s strategy seems to be moving back t...
- Phillip Zhong
Morningstar | Soho China Strategy Unclear, Rental Portfolio Results Lo...
Soho China reported full-year 2018 results slightly below our expectations. Rental turnover and gross profit were down 1% and 9% year on year, respectively. The margin compression was likely due to slightly lower occupancy and opening expenses. The company declared a final dividend of CNY 0.030 per share. We maintain our fair value estimate of HKD 3.40 and our no-moat rating. Operationally, the portfolio’s performance was reasonable. However, the company’s strategy seems to be moving back t...
- Phillip Zhong
Soho China Strategy Unclear, Rental Portfolio Results Lower on Compres...
Soho China reported full-year 2018 results slightly below our expectations. Rental turnover and gross profit were down 1% and 9% year on year, respectively. The margin compression was likely due to slightly lower occupancy and opening expenses. The company declared a final dividend of CNY 0.030 per share. We maintain our fair value estimate of HKD 3.40 and our no-moat rating. Operationally, the portfolio’s performance was reasonable. However, the company’s strategy seems to be moving back ...
- Phillip Zhong
Morningstar | Reverting back to rental, 3Q spin-off lacking progress
Ahead of the 2018 full-year results, we adjusted our model to reflect the lack of clarity about the spin-off of the third-quarter business and lack of asset disposal. Assuming there is a slower ramp up of the third-quarter business and newly completed assets will be positioned for rental instead of disposal, we reduce our fair value estimate from HKD 4.10 to HKD 3.40, and our no-moat rating is unchanged. The company’s main business is leasing offices in Beijing and Shanghai and this should re...
- Phillip Zhong
Reverting back to rental, 3Q spin-off lacking progress
Ahead of the 2018 full-year results, we adjusted our model to reflect the lack of clarity about the spin-off of the third-quarter business and lack of asset disposal. Assuming there is a slower ramp up of the third-quarter business and newly completed assets will be positioned for rental instead of disposal, we reduce our fair value estimate from HKD 4.10 to HKD 3.40, and our no-moat rating is unchanged. The company’s main business is leasing offices in Beijing and Shanghai and this should rem...
- Phillip Zhong
Morningstar | New Morningstar analyst report for SOHO China
While many Chinese developers aspire to become landlords, and several have assembled large portfolios of investment properties, most still rely on residential trading to generate cash flow to fund ongoing operations and to build out investment properties. Soho China is distinctive in that it is moving to a build-and-hold model.Since its transition from built-to-sell to build-and-hold in 2012, Soho has assembled a portfolio of office assets across the central business districts of Beijing and Sha...
- Phillip Zhong
New Morningstar analyst report for SOHO China
Since announcing subdued interim results in August, Soho China’s shares have fallen more than 15%, in line with high-beta names in the Chinese property sector. The government’s ongoing deleverage effort has led to some liquidity concerns for the more highly geared or smaller developers. However, recent policies pointing to a possible relaxation of property sector measures may boost market sentiment. Further, the company’s risk profile as the owner of investment properties is different from...
- Phillip Zhong
Soho China Shares Undervalued, With Asset Sale and 3Q Spin-Off Still P...
Since announcing subdued interim results in August, Soho China’s shares have fallen more than 15%, in line with high-beta names in the Chinese property sector. The government’s ongoing deleverage effort has led to some liquidity concerns for the more highly geared or smaller developers. However, recent policies pointing to a possible relaxation of property sector measures may boost market sentiment. Further, the company’s risk profile as the owner of investment properties is different from...
- Phillip Zhong
Morningstar | Soho China Interim Core Earnings in Line, but Rental Inc...
Soho China reported half-year 2017 results in line with our expectations. Excluding revaluation gain and disposal gain, core earnings were estimated to be CNY 129 million, compared with our full-year estimate of CNY 240 million. For the rental segment, performance was subdued, with turnover and gross profit up 4% and down 1% year on year, respectively. The spin-off of the 3Q business is expected to be the next driver to unlock value in the company. However, the company did not separately disclos...
- Phillip Zhong
Soho China Interim Core Earnings in Line, but Rental Income Growth Wea...
Soho China reported half-year 2017 results in line with our expectations. Excluding revaluation gain and disposal gain, core earnings were estimated to be CNY 129 million, compared with our full-year estimate of CNY 240 million. For the rental segment, performance was subdued, with turnover and gross profit up 4% and down 1% year on year, respectively. The spin-off of the 3Q business is expected to be the next driver to unlock value in the company. However, the company did not separately disclos...
- Phillip Zhong
Morningstar | Soho China Expands 3Q, but Profitability Unclear
Soho China recently indicated that it is aggressively expanding 3Q, its coworking space offering. The company stated that it has 30,000 seats as of early 2018 and is targeting 50,000 by the end of the year. The company is looking to spin off 3Q through a separate listing sometime in 2019. However, the profitability of the company’s coworking business is unclear at this point. In addition, the company is still seeking to dispose of Tianshan Plaza, which may unlock some value through a special d...
- Phillip Zhong
Soho China Expands 3Q, but Profitability Unclear
Soho China recently indicated that it is aggressively expanding 3Q, its coworking space offering. The company stated that it has 30,000 seats as of early 2018 and is targeting 50,000 by the end of the year. The company is looking to spin off 3Q through a separate listing sometime in 2019. However, the profitability of the company’s coworking business is unclear at this point. In addition, the company is still seeking to dispose of Tianshan Plaza, which may unlock some value through a special d...
- Phillip Zhong
China's Debt: The Consequences of Bingeing on Debt
The rapid expansion in China's debt/GDP ratio has raised concerns among many observers, including us, because it is reminiscent of prior credit booms that have ended badly. Having watched Beijing repeatedly stimulate its way to higher growth, investors ask why this can't continue. Bluntly, if credit continues to outpace GDP growth significantly, we expect one of two scenarios to eventually occur. The first scenario is a full-blown credit crisis. Here, we'd see credit availability sharply contra...
- Phillip Zhong
Soho China Full-Year Results In Line; Earnings Boosted by Disposals
Soho China reported full-year 2017 results in line with expectations. Rental turnover and gross profit were up 11% and 12% year on year, respectively, with margin edging up slightly. The increase was attributed to higher rental income as the rental portfolio continues to mature. During the year, the company declared two special dividends totaling CNY 0.922 per share, with no further year-end dividend. Both special dividends were funded by proceeds from asset disposals. We expect one more asset d...
- Phillip Zhong
Adjusting FVE to Account for a Special Dividend
We have adjusted our fair value estimate for Soho China on the ex-dividend date of a large special dividend. We change our fair value estimate to HKD 4.10 from HKD 4.60, while maintaining the company’s no-moat and stable trend ratings. We believe the shares are overvalued at this point. Additional asset disposals will likely boost the share price on the expectation of distributions via special dividend. However, continued asset sales will diminish the company’s prospects of transforming its...
- Phillip Zhong
Special Dividend as Expected; Share Price Run-Up Not Justified
Soho China has announced a special interim dividend of CNY 0.576 (or HKD 0.677) per share. After the announcement, the share price moved up by 10%, or HKD 0.45, to HKD 5.14. We do not believe the share price jump is justified, as the special dividend, while larger than expected, was already priced in. We maintain our fair value estimate of HKD 4.60, along with our no-moat rating on the company. The shares are overvalued at this point. The special interim dividend was widely expected after the sa...
- Phillip Zhong
Another Asset Disposal to Unlock Value for Soho China, but Path Forwar...
Soho China has announced it will dispose of Sky Soho based on an asset value of CNY 5,008 million. The sale price represents an 8% premium to the asset’s latest book value. The asset accounted for about 11% of the company’s rental income during first-half 2017, and the sale is part of the company’s announced strategy of unlocking value through the disposal of noncore assets. As Soho China is trading below its book value, the disposal will narrow the discount. We have adjusted our assumptio...
- Phillip Zhong
Uncertainty and volatility abound amid Soho's transition.
Soho China report half-year 2017 results below our expectations. Excluding revaluation gain, core earnings were a loss of CNY 650 million, due to high land appreciation tax on property sales. This is below our projection of a profit of CNY 440 million for the year. Turnover and gross profit are up 47%% and 31% year on year, respectively. The top-line increase was mostly due to higher property sales of leftover units. Rental incomes grew modestly due to higher occupancy, and margin also improved ...
- Phillip Zhong
Soho China Interim Results a Miss, Special Dividend Unlock Some Value
Soho China report half-year 2017 results below our expectations. Excluding revaluation gain, core earnings were a loss of CNY 650 million, due to high land appreciation tax on property sales. This is below our projection of a profit of CNY 440 million for the year. Turnover and gross profit are up 47%% and 31% year on year, respectively. The top-line increase was mostly due to higher property sales of leftover units. Rental incomes grew modestly due to higher occupancy, and margin also improved ...
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