The Politburo sent a clearer message of support for the housing market. However, the industry is still under great pressure, with property sales negatively impacted by COVID-19 restrictions in April and financing for developers turning even tighter. Apr 22’s Top 100 contracted sales declined 16.2% mom and 58.6% yoy, indicating that homebuyers are shunning debt-laden private developers. We think the possibility of easing of financing regulations may be rising. Maintain OVERWEIGHT.
3M22 property FAI slowed to +0.7% yoy, new construction starts slumped to -17.5% yoy while land transacted area declined 41.8% yoy. The gloomy market outlook coupled with tight liquidity conditions are hurting appetite for land acquisitions. 3M22 home sales value slumped 25.6% yoy and home inventory shrank 2.64% mom, partly attributable to the slower pace of new project launches. Sporadic lockdowns may defer the housing market’s recovery in core cities to 2H22. Maintain OVERWEIGHT.
The regulator gave assurances that it will support the housing and capital market, calling for new policies to resolve risks in the property sector. The Finance Ministry confirmed the deferral of property tax trial. CBIRC reiterated their support in M&A financing issuance while CSRC pledged to support domestic bond issuance by private enterprises. The upcoming policy support should limit the downside potential, and coupled with the current attractive valuation, we upgrade the sector to OVERWEIGH...
Bank loans for affordable rental housing projects have been excluded from banks’ two red lines metrics. It grants easier access to cheap financing to encourage new investments in the segment. Rental housing operators will assess the net impact of obtaining affordable rental housing certification based on operational conditions. More policy support is needed to ensure a sustainable business model and investment attractiveness of the segment. Maintain UNDERWEIGHT.
The independent financial analyst theScreener just awarded an improved star rating to SHIMAO GROUP HOLDINGS (HK), active in the Real Estate Holding & Development industry. As regards its fundamental valuation, the title receives an improved star rating and now shows 2 out of 4 possible stars. Given its market behaviour as risky, theScreener considers that these elements allowing slightly upgrading its general evaluation to Slightly Negative; the title, however, remains unattractive. As of the an...
2021 property FAI rose 4.4% yoy, the lowest since 2015. Tight liquidity and gloomy market outlook have dampened developers’ appetite, with new construction starts declining 31.2% yoy in Dec 21. Dec 21 property sales rebounded by 40% mom, driven by aggressive project launches and pricing strategies. New home prices slid another 0.3% mom in Dec 21. Waning investor confidence is expected to restrain developers’ debt raising ability from the primary market. Maintain UNDERWEIGHT.
Over 80% of the leading developers failed to achieve their sales targets in 2021 while SOE developers generally outperformed the industry. The financing environment remains challenging as the recent easing measures only benefitted “high-quality” developers. M&A financing for SOEs could be exempted from Three Red Line limitations while the Guangdong provincial government is reported to be facilitating M&As in the industry. Policies continue to favour SOEs. Maintain UNDERWEIGHT.
Be wary of the spillover effects from the potential default events in the sector which would also weigh on market sentiment. Keep an eye on the potential interventions from the regulators and the magnitude of the corresponding policy changes. Property sales and home prices further softened in November, with the market yet to bottom. Developers are more aggressive with their pricing strategies in order to close the gap with their annual sales targets. Maintain UNDERWEIGHT.
10M21 property FAI growth further slowed to +7.2% yoy. Oct 21 property sales slumped 21.3% mom while new home prices reported the steepest mom decline since Feb 15 at - 0.3%. The central government remains firm on its policy stance, and policy fine-tunings have to remain within boundaries. A gradual easing of credit conditions will improve developers’ tight liquidity conditions and support the eventual recovery of property sales. Maintain UNDERWEIGHT.
Sep 21 property FAI further slowed to 8.8% yoy. Property sales remained subdued during the traditional peak season; Sep 21 sales value/area were 16%/13% lower yoy. More marginal easing from lower-tier cities is expected while relaxation of loan restrictions could help in containing the sector’s default risk. Potential introduction of property tax could again derail market sentiment. We prefer property management companies over developers. Maintain UNDERWEIGHT.
Restricted financing channels and capabilities have started to slow down developers’ new investments. The land market is showing signs of cooling down with a rising number of lands transacted at reserve prices and increasing failed auctions. The market is turning pessimistic on property sales prospects; policy headwinds and rock-bottom sentiment will continue to suppress the sector’s valuation. It is recommended to remain selective to protect against the potential spillover effect of the Evergra...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
A director at Shimao Group Holdings Limited bought 500,000 shares at 18.238HKD and the significance rating of the trade was 67/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last ...
Real estate loan growth slowed to an eight-year low at 10.5% yoy in Apr 21. CBIRC remains firm on its stance to restrict funds flowing into the real estate industry. Property sales growth of the TOP 100 developers in May 21 normalised to 17.8% yoy due to the less aggressive launching of projects. Market supply and transaction volume will see a steep rebound in Jun 21 due to developers’ final push before their interim closing. Maintain UNDERWEIGHT. Top pick: Powerlong (1238 HK).
Residential property sales are driving the recovery in total contracted sales, while the commercial property market remains weak. Demand for residential property is strong as evidenced by increasing transaction prices in large cities. Newly-started constructions have recovered since Feb 21. Agile is the biggest beneficiary among developers of Hainan’s reform plan. Downgrade the sector to UNDERWEIGHT. Top pick is Powerlong (1238 HK) with a higher target price of HK$10.20.
The Top 100 developers achieved contracted sales of Rmb986.3b (+70.9% yoy) in Jan 21. The impressive growth was largely due to the low-base effect in 2020. Sector valuation remains low as the market is concerned with developers’ solvency risks after China Fortune Land recently defaulted on its debt. Cash flow risk is the major concern now, because even some large-scale developers may face difficulties in repaying their short-term debts, as evidenced by the alarming solvency-related indicators.
Tier-1 property market remained sizzling hot in 4Q20 as evidenced by a 27% yoy decline in inventory-to-sales ratio as of end-Dec 20. Inventory-to-sales ratio in Tier-2 cities was rather flattish with a 3% yoy increase while that of the Bohai Rim region was at a concerning level of 15.05 months. Overall property inventory level remains healthy with Tier-1 cities and GBA expected to continue outperforming the others. Maintain MARKET WEIGHT. Top Pick: Powerlong (1238 HK).
Recovery in residential property sales is driving the recovery in total contracted sales, while the commercial property market remains weak. Demand for residential property is still strong, as evidenced by increasing transaction price of new property in all city tiers. Inventory-to-sales ratio in Tier-1 cities was 31.3 weeks, much lower than Dec 19’s average of 42.1 weeks. We think negative impacts are largely priced in. Maintain MARKET WEIGHT. Top pick is Powerlong (1238 HK).
Shimao has lowered its sales growth guidance from CAGR 20-30% p.a. (2020-24) to a rather conservative 10% growth in 2021. However, Shimao still expects to outperform the Top 10 developers and are confident in maintaining gross margin at ~30%. Downward revision of contracted sales growth was mainly due to: a) higher-thanexpected land cost in Tier-1 and Tier-2 cities; and b) the Three Red Lines policy capping its borrowing capacity, and hence slowing down the pace of expansion. Maintain BUY. Targe...
KEY HIGHLIGHTS Economics Trade Broad-based recovery in exports; but may not sustain. Sector Automobile November auto sales growth estimated at 11.1%, in line with estimates. Maintain OVERWEIGHT. Top picks: BYD, CATL and Minth. Update China Zhengtong Auto Services Holdings (1728 HK/SELL/HK$0.85/Target: HK$0.55) Stake in Dongzheng at risk due to compliance issue. Maintain SELL. Target price: HK$0.55. Shimao Group Holdings (813 HK/BUY/HK$23.80/Target: HK$31.40) Sales growth still above aver...
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