China Property 2009-10-21 RBS X
China Property 2009-10-21 RBS X
China Property 2009-10-21 RBS X
Produced and issued by: ABN AMRO Bank NV Hong Kong Branch+
Equity | Real Estate | China
21 October 2009
Jan 06
Jan 07
Jan 08
Jan 09
70
Important: Third quarterly real estate report – National Bureau of Statistics (15 October)
Jan 07 Dec 07 Nov 08
According to the National Bureau of Statistics, growth in property sales, real estate investment,
Source: National Bureau of Statistics (NBS) developer borrowing and mortgage lending continued to accelerate in September. Real estate
investment was Rmb2.5tn in the first nine months of 2009, up 17.7% yoy, 3ppt higher than in ytd
Chart 2 : FAI and retail sales August. GFA under construction, GFA newly commenced and GFA completion was 2.8bn sq m
growth (yoy) (up 15.4% yoy), 732m sq m (down 0.4% yoy), and 334m sq m (up 24.7% yoy), respectively. GFA
sold over the period reached 583m sq m (up 44.8% yoy, 1.9ppt higher than ytd August), or
40% FAI growth (LHS) 24%
Rmb2.7trn (up 73.4% yoy, 3.5ppt higher than ytd August). ASP in 70 cities increased 2.8% yoy or
Aug 09: 33.6%
0.7% mom in September, of which overall residential ASP was up 3% yoy and that for small-size
22%
35% units was up 4.9% yoy. Total funding for real estate developers was up 38.8% yoy to Rmb3.9trn.
20% Of this, internally generated funds accounted for Rmb1.3trn (up 14.5% yoy), presale proceeds
30%
accounted for Rmb1trn (up 52% yoy) and personal mortgages accounted for Rmb535bn (up
18%
108% yoy). In contrast to this data, Soufun data for eight major cities suggests that volume has
16%
fallen for four consecutive months since June 2009, with September down 10% mom. Transaction
25%
volume in Beijing and Shanghai dropped 25% and 11% mom in the first 18 days of October while
14% Shenzhen and Guangzhou saw increases of 73% and 39% mom. We believe transaction volume
20% will continue to fall for the rest of this year but that ASP will remain high as developers have no
Aug 09:15.4% 12%
reason to cut prices, especially given their strong cash positions and achieved sales.
Retail sales growth (RHS)
15% 10%
Feb 07 Oct 07 Jun 08 Feb 09 Important: Policy risk on the rise – China Land Surveying and Planning Institute (9 October)
Source: NBS The China Land Surveying and Planning Institute, the official think-tank of the Ministry of Land and
Resources of the PRC issued a report on 9 September warning of the risk of a sharp ASP
Chart 3 : Enterprise revenue increase on the back of falling volumes. The report went on to detail possible measures, including
and profit growth (yoy) limiting land supply for luxury projects and prohibiting land hoarding to cool the property market.
Mr Qiji, the Deputy Minister of the Ministry of Housing and Urban-Rural Development (MOHURD),
40%
August Quarterly revenue growth
was widely quoted in the press (28 September) saying that the MOHURD does not support high
30% 6% property prices, and he urged local governments to increase low-cost housing. This is reportedly
20% MOHURN’s first stance on rising property prices this year. Our site visits to some of the major
Chinese cities confirm that mortgage tightening is real and implementation has been firm.
10%
Secondary market transactions are now also being closely monitored to ensure transactions are
0% properly taxed. We believe rapidly rising ASPs have sparked central government concern. While
-10% we do not expect any new policies for the rest of this year, verbal warnings, reiteration of prior
-20%
policies and any withdrawal of prior stimulus packages should be enough to hurt market sentiment.
-30%
Relevant: Accumulative housing fund loans for housing projects – MOHURD (16 October)
August Quarterly
-40%
profit growth MOHURD and six other ministries jointly released a notice on 14 October allowing the idle
-50% 7%
accumulative housing fund to be loaned out for the development of low-income housing. The 36
Feb-08 Aug-08 Feb-09 May-09 Aug-09
cities to launch pilot programmes can take no more than 50% of the balance after minimum
Source: NBS deposits are reserved. The interest rate should be 10% higher than the five-year public housing
fund borrowing rate (currently 3.87%). We believe the immediate effect will be limited to increasing
housing supply, as the estimated available funds (Rmb300bn) represent only a fraction of total
funding for the real estate sector (Rmb2.5trn in 3Q09).
Three China property companies were listed in Hong Kong over the past three weeks.
Another four have passed the listing hearing and will likely be listed in 4Q09. Poor stock
performances post-IPO, however, should be a drag on the sector’s overall performance.
BBMG (2009 HK), a Beijing-based construction material manufacturer and property developer,
raised HK$6.85bn at HK$6.38 per share. China South City (1668 HK), a developer and operator
of a mega trade centre in Shenzhen, raised HK$3.15bn at HK$2.1 per share. Glorious Property
(845 HK), a developer focusing on Shanghai, Beijing and Tianjin with landbank of 13.6m sq m,
raised HK$9.9bn at HK$4.4 per share; the company forecasts it will achieve 2009 net earnings of
Rmb2bn (including a revaluation gain of Rmb600m). Powerlong (1238 HK), a developer and
operator of shopping centres in tier-2 cities with a landbank of 7m sq m, raised HK$2.75bn at
HK2.75 per share; the company forecasts it will achieve 2009 net earnings of Rmb3bn (including a
revaluation gain of Rmb1.8bn).
Chart 4 : Post IPO performance – Chart 5 : Post IPO performance – Chart 6 : Post IPO performance –
China South City Glorious Property Powerlong
-5% 2%
-5%
1%
-10%
-10% 0%
-15%
-1%
-20% -15%
-18% from IPO price -2%
-30% -4%
-25%
-35% -5%
29 Sep 06 Oct 13 Oct 20 Oct 13 Oct 15 Oct 17 Oct 19 Oct
-30%
01 Oct 06 Oct 11 Oct 16 Oct
Table 1 : Valuation of Four other China property companies have passed the listing hearing (Fantasia IPO
developers soon be listed delayed to 10 November)
IPO Price 10F PE Evergrande (3333 HK), a developer focusing on mega residential projects mainly in second- and
(HK$) (x)
third-tier cities with a landbank of more than 50m sq m, plans to raise no more than HK$6bn at
Evergrande 3.0 – 4.0 4.7 - 6.3
HK$3-4 per share. (Hong Kong Economic Times)
Yuzhou 2.7 - 3.7 5.2 - 7.1
Excellence 2.1 - 2.6 9.2 - 11.4
Yuzhou Group (1628 HK), a Xiamen-focused regional developer with a landbank of 3.5m sq m
MingFa 3.03 - 3.79 5.8 - 7.2
GFA (1.6 m sq m in Xiamen), plans to raise no more than HK$2.22bn at HK$2.7-3 per share. The
Source: Hong Kong Economic Times
company forecasts it will achieve 2009 net profit of Rmb1.1bn (including a revaluation gain of
Rmb699m). (Hong Kong Economic Times)
MingFa Group (846 HK), an urban complex developer focusing on Xiamen and Jiangsu, plans to
raise no more than HK$3.4bn at HK$3.03-3.79 per share. The company forecasts it will achieve
2009 net profit of Rmb861.5m (including a revaluation gain of Rmb358m). (Hong Kong Economic
Times)
In general, property prices have risen 30-40% since the market bottomed a year ago. However,
compared with other cities, Shanghai has not corrected as much. For many projects in the primary
5%
market, prices are 20% or more above previous peak levels in 2007. Prices in the luxury segment
reached new highs with more than 13 projects commanding more than Rmb100k per sq m.
CPI Compared with HK, where developers have tried hard to brand mid-end units as high-end ones,
0%
Shanghai’s mass-market residential apartments have maintained their branding status but have
Aug 09: -1.2% still appreciated by as much as their high-end equivalents. Most projects we visited, including one
situated 1.5 hours away from the city centre, is now selling for more than Rmb10k per sq m.
-5%
PPI
Similar to what we saw in Beijing, Tianjin and Shenyang a month ago, almost all local sales staff in
Aug 09: -7.9% Shanghai seemed quite satisfied with their sales progress and do not seem to be in a hurry to
-10%
Jan 08 Jul 08 Jan 09 Jul 09 boost sales in the remaining months of this year. Management teams noted that they are more
interested in maintaining current high prices than improving asset churn. This supports our view
Source: CEIC
that volume is likely to remain low while prices stay high for the rest of this year.
Chart 8 : Electricity
Meanwhile, the onset of mortgage tightening for second-home purchases since September should
consumption growth and
PMI have a negative impact on property sales, as property investors tend to rely more on mortgage
financing. We believe the more important factor causing volume decline is rapid price
15% 60% appreciation.
September PMI:
54.3%
The more remote projects we visited were in Lingang New City, Fengxiang and Minhang. Lingang
10% 55%
New City is about 35km south of Pudong International Airport and is at the ocean front close to
Donghai bridge which connects the mainland to the Yangshan Deep Water Port. New projects –
5% 50% including large-scale residential projects, low-rise office buildings and resort hotels, such as
Crowne Plaza (355 rooms) – are being developed around Dishui Lake. Greenland’s Future
World was first launched in 2007 at an ASP of Rmb7k per sq m. Only a few semi-detached units
0% 45%
charging Rmb11k-15k per sq m remain unsold. Lingang New City is part of the Nanhui District,
which has a focus on logistics and manufacturing given its proximity to the airport and port.
-5% 40%
Recently, the State Council incorporated Nanhui into Shanghai Pudong New District. This has
September
Electricity
elevated the economic status of Lingang New City and solidifies Pudong’s position as both a
consumption financial hub and a maritime centre in the country. The Shanghai government has also committed
+1% yoy
-10% 35% to developing the area by including seven sites in Lingang New City – total GFA of 500k sq m of
Feb 08 Aug 08 Feb 09 Aug 09
Electricity Consumption (LHS)
low-density residential units – on its land supply list. However, because the area faces adverse
PMI (index, RHS)
weather conditions and should mainly attract buyers working in the area, we think property prices
in Lingang New City will take a few years to appreciate.
Source: CEIC, China Federation of
Logistics & Purchasing
Shimao’s Emmen Royal County is located in the Spark Development Zone in Fengxiang District.
Chart 9 : Auto production/
sales monthly growth (yoy) The project is 50km south of Shanghai’s city centre and 35km east of Lingang New City. It is also
close to the water front of Hangzhou Bay. Shimao bought the project in 2007 in the secondary
market and took advantage of the natural surroundings of the project by developing a horse range
90% adjacent to its townhouses. The company launched the project at the end of 2008, but poor
Sep 09 sale: +77%
market conditions resulted in slow sales until April 2009; the project was then selling for Rmb7k
70%
Sep 09 production: +78% per sq m. Only 40 of the original 370 units are left, with the townhouses charging Rmb11k per sq
50%
m. The effective price is around Rmb9k per sq m with the 25% free GFA (underground or
balcony). Real estate agents indicated strong interest from Shanghai city residents who intend to
30% use the property as a weekend home, but also slower sales since the mortgage tightening in
September.
10%
Minhang, a villa district, is about 30 minutes away from the city centre. The area is well served by
-10%
metro line No. 5, but some projects are located quite a distance from the stations, so prices vary.
The sales offices of two projects we visited, Hopson Town and Forte Park Town, were relatively
-30%
Jan 07 Jan 08 Jan 09 empty due to lack of supply of new units. Hopson Town was last launched with an ASP of Rmb8k-
Production Sales
9k per sq m in February 2008 before the market began to correct. Because the 90/70 rule applies
to this project, most units are smaller apartments. Sales so far this year have been moderate.
Source: CEIC
Forte Park Town is located 10 minutes drive north of Hopson Town. It has mainly detached villas
selling for Rmb25k per sq m or Rmb5m-7m per villa unit, vs Rmb20k per sq m at the end of 2007,
representing 25% price growth from the last peak. The project targets mainly white-collar buyers
working in the southern part of Shanghai. 70% of launched units were sold at the launch last
week.
Figure 2 : Lingang New City (Greenland’s Future World) Figure 3 : Lingang New City (Dishui Lake)
On average, the ASP of luxury properties is Rmb50k-60k per sq m for those located at the border
of the inner ring road, Rmb70k-90k per sq m for prime districts within the inner ring road, and
Rmb100k per sq m or above for the most prestigious areas with views of the Huangpu River.
However, as the market continues to heat up, more projects will likely become overpriced.
Shanghai Star River is one of the best luxury projects we saw in Shanghai. Although this is the
very first project developed by Star River in Shanghai and the project’s access to the subway is
not as convenient as competing projects, the units’ spaciousness, quality, detail, layout,
landscaping, greenery and furnishings are exceptional, in our view. ASP is Rmb60k per sq m vs
management’s initial guidance of Rmb46k per sq m. Sales hit Rmb4bn on the first day of the
launch, a record in Shanghai. Almost all 322 units launched are now sold and the next launch will
occur in two years. The project has auxiliary facilities such as a conventional hall, sports facilities,
a hotel and catering services. Buyers of Guangzhou Star River and Beijing Star River reportedly
flew to Shanghai for the launch but still failed secure units. We believe management aims to
establish its reputation in the city by offering premium quality products at a reasonable price. The
site was purchased in 2007 at what was then considered a very high price (more than Rmb10k
per sq m). Due to its superior quality Star River beat Gemdale and CRLN to win the site despite
having offered a lower bid. We believe Star River now trumps Yanlord’s Riverside City in setting
the standard for well-run, high-quality and large-scale luxury property in Shanghai.
Shanghai Shimao Riviera Garden’s location is more desireable but the quality of this project is
somewhat lower compared to Star River. The project is made up of seven mega towers (3,200
units), which was first launched in 2000 with much fanfare. Its waterfront location is within a five-
minute drive from Pudong Lujiazui, an area that attracts many locals and foreigners working in the
financial industry. This has supported fast sales at a high selling price. The project was the most
important project for the company between 2002 and 2006 and achieved Rmb2bn sales in 2005
and Rmb4bn in 2006. Its plan to launch the last tower at an ASP of Rmb65k per sq m was
derailed by the market correction in late-2008 and ASP fell to as low as Rmb40k-50k per sq m in
March 2009. The market recovery in 2Q09 then quickly boosted sales, with sales of 280 units (out
of a total of 414) generating Rmb2.5bn. In view of the buoyant market and difficulty in securing
new prime sites in Shanghai, management deliberately slowed sales after July by raising the
asking price to Rmb90k-120k per sq m for units above the 30th floor. Cheaper units sold earlier
this year are mostly below the 30th floor, which have views of the river partially blocked by SHKP’s
The Arch. The Arch should be launched in two years with a estimated ASP of more than Rmb200k
per sq m.
Like Shanghai Shimao Riviera Garden, Glorious’ Shanghai Bay is also a large-scale waterfront
residential project (total GFA of around 900k sq m), but the former is in the mature financial district
of Pudong while the latter is in Puxi, a still-developing residential area. With sales of Rmb2.6bn
the project ranked second in Shanghai in 2008, according to Soufun. Prices have jumped
significantly from Rmb30k per sq m in 2008 to Rmb60k per sq m with the recent launch of Tower 8
and to Rmb90k per sq m for Tower 2, which is situated at the waterfront. These prices significantly
exceed previous market expectations, thanks to the record-breaking price (Rmb27k per sq m)
achieved for a nearby government site. The integrated project includes two hotels, a shopping
mall and offices, with the Kempinski Hotel targeted to open in 2010. As a luxury property, we
believe Shanghai Bay’s ability to fetch Rmb90k per sq m in a non-prime location indicates that the
market is overheating.
SHUI’s Xintiandi project, known as Casa Lakeville, which is now in phase 3, is a very successful
integrated development that has preserved the historic buildings in the area. To many foreigners, it
is viewed as being among the first and most well-known luxury properties in Shanghai and in all of
China. The best three towers of Casa Lakeville were first launched in June 2008 at an ASP of
Rmb85k per sq m. Tower 11, which does not have a lake view, was launched in May 2009 at a
discounted price of Rmb57k per sq m. Tower 12, also without a lake view, saw immediate take-up
despite a 20% price increase from the previous month’s launch. The last tower, which has the
worst view, was launched in August at Rmb70k per sq m and was cleared almost immediately.
The remaining units of Casa Lakeville now command Rmb80k-120k per sq m.
Five low-rises (mainly duplexes) remain under construction above a retail podium in Casa
Lakeville. We think the target selling price will likely exceed Rmb100k per sq m. The next phase of
the Xintiandi project is the construction of Corporate Avenue P2, which is to be completed in 2011.
Relocation of the next residential phase, lot 116, is still ongoing but negotiations with local
residents will likely take time.
SHUI’s second major project in Shanghai is Ruihong Xincheng (RHXC), a large-scale (1.3m sq
m GFA) mass-market residential project located in the centre of Hongkou District above a subway
station. The quality of the project’s Phase 3 has improved significantly from Phase 2, which was
sold in 2006 for Rmb16k per sq m. Almost all 248 units of Phase 3 (mostly large-size units) were
sold at launch at Rmb30k per sq m. The next phase (lot 4) is situated between Phase 1 and
Phase 2 and is currently under construction. The sales staff aim to launch the project at the end of
2010 at an ASP of Rmb35k per sq m for the predominantly small-size apartments (80-90 sq m).
After lot 4, lot 6 will be next to go through relocation.
SHUI’s third project in Shanghai is located in Yangpu District close to several reputable
universities. The project provides a mix of low-rise office buildings and retail space, called KIC
Plaza, and a low-density residential area, called KIC Village. KIC Village Phase 2 offers 600 units
with a wide range of sizes that sell for an average of Rmb28k per sq m, versus Rmb22k per sq m
at the beginning of the year. The general image of the KIC project and the adjacent Wujiaochang
area has improved, thanks to the addition of several major shopping malls such as Wanda Plaza
in 2006, Orient Shopping Centre and Bailian Youyicheng in 2007 and the future Shanghai Hopson
International Plaza, which is currently under construction. We expect the area to become more
popular as tenants, workers and residents move into KIC Plaza and KIC Village.
Management has committed to increase its asset churn in the coming years and indicated that it
has sped up progress in relocations. SHUI’s brand, its product quality and superb master planning
should help consolidate its position in Shanghai, but we also believe landbank replenishment in
Shanghai remains crucial, especially as the company’s projects in other cities will take time to
make a meaningful contribution to the bottom line.
Figure 19 : Shui On Land’s Ruihong Xincheng (RHXC) P3 Figure 20 : RHXC’s adjacent lots to be resettled
Figure 21 : Shui On Land’s KIC residential portion Figure 22 : Shui On Land’s KIC office portion
Bundfield is located along the North Bund, just north of FRAN's Shanghai Port International
Cruise Terminal project. It offers a spectacular view of the Huangpu River, at the northern part of
the Pudong Lujiazui financial district and The Bund. However, views below the 14th floor will be
blocked by the Banyan Tree hotel after it is constructed. Prices therefore vary significantly: prices
for 128-278 sq m units below the 14th floor have risen to Rmb70k per sq m from Rmb50-60k per
sq m in January, while prices for 304-371 sq m units above the 14th floor have risen to Rmb120k-
160k per sq m from Rmb100k per sq m in January. Sales have been slow due to weak marketing,
mediocre product quality, inconvenient access and the wide price premium versus previous
phases of the same project that were developed by a different company. The project launched
more than 130 units in 2008 but only 30 have been sold so far. We believe the company aims to
maximise selling prices and profit rather than volume for this project.
We are slightly disappointed with the sales performance of KERR’s Shanghai Central
Residences Phase 2. The company launched 30 units of Tower 2 (all below the 20th floor) in
August but only managed to sell 16 at an ASP of Rmb86k per sq m, despite a improved market
environment. We believe the poor performance was due to the project’s average interior décor
standards. In contrast, nearby projects such as Huashan Residence (Jin’an District; selling for
Rmb95k per sq m) saw a better response at its launch last week. Another competing project in the
area is Wharf’s No.1 Xinhua Road, which launched recently at Rmb75k per sq m. For KERR’s
Shanghai Central Residence, the remaining units above the 20th floor will be launched at the end
of October. Management plans to raise prices 3-4%. The other two towers of Phase 2 are for
lease: Tower 3 offers 154 units (135-200 sq m) but is only 70% occupied, and Tower 1 offers 60
units (238-341 sq m) and is 92% occupied. Daily rents average around Rmb5.5 per sq m, implying
less than a 3% yield versus 4-5% at the peak of the market.
Another project with slow sales is Prince Hills located at a busy intersection in Changning District.
The project includes two residential towers, an office tower, a shopping podium and Hotel Nikko
(388 rooms), which is scheduled to open in 2010. Despite its prime location and supporting
facilities, more than 20 units remain unsold out of a total of 100 two years after the initial launch.
Prices have been relatively flat; the latest target price of Rmb70k per sq m is up slightly from the
Rmb50-60k per sq m at the launch in September 2007. CBRE is the sales agent for the project.
We believe the developer prefers to maximise prices rather volume given the scarcity value of the
project.
SPG is developing the Peninsula Shanghai in a joint venture with Hong Kong and Shanghai
Hotels. The hotel offers 235 hotel rooms and suites with impeccable interior décor. The
introductory room rate of around Rmb2,500 per night is nearly double that of SHIM’s Hyatt on the
Bund. One of its largest suites has two huge balconies, each of the size of a basketball court with
a 360-degree view of Shanghai Puxi and Pudong. The rack rate is Rmb85k. We believe the
hotel’s F&B and wedding banquet businesses should do well as Peninsula Shanghai provides a
classic European atmosphere quite unlike most of the modern five-star accommodation provided
by international hoteliers in Shanghai. Its entrance lobby mimics The Peninsula Hong Kong, a
popular rendezvous spot for high tea. Adjoining the hotel building is a serviced apartment, which
has no river view. The showroom was closed for redesigned during our visit, but the hotel staff
said that the 275-435 sq m units will likely command more than Rmb200k per sq m when
launched for sale towards the end of this year.
Figure 27 : SPG Land’s Peninsula Shanghai Figure 28 : SPG Land’s Peninsula Residences
The Bound of Bund is just across the street and was originally the Phase 2 of The Bund Side,
which was first launched in 2005 at an ASP of Rmb18k per sq m. The latest selling price is
Rmb40k per sq m. The Bound of Bund has a total GFA of 100k sq m and is selling 288 units in six
towers. The cheapest units are 188 sq m and start at Rmb55k per sq m. However, the sales staff
emphasised that the company has not set a target maximum selling price or average price and
prefers to sell the project slowly over three years to maximise profit.
Figure 31 : CR Land’s The Bound of Bund Figure 32 : CR Land’s The Bound of Bund
Charts 11-14: Beijing, Shanghai, Shenzhen and Chart 10 : Secondary property price index of major cities
Chongqing posted volume drops of 16.8%, 22.7%, 14.6%,
and 7.1% in September 2009 vs August 2009. 280
Aug Shenzhen: +38% from low in Feb 09
260
Charts 11-14: In the second full week of October (October Aug Beijing: +17% from low in Feb 09
12th-18th ), Beijing, Shanghai and Shenzhen showed wow 240
increases in transaction volume of 16%, 56%, and 46%. 220 Aug Guangzhou: +47% from low in Feb 09
This is partially due to the low base effect of poor sales in 200
“Golden Week”. Aug Shanghai: +29%from low in Feb 09
180
Charts 11-14:In the first 18 days of October, transaction 160
volume in Beijing ,Shanghai dropped 25% and 11%,
140
espectively. While Shenzhen increased 73%. During the
same period, ASP in Beijing and Shenzhen increased 120
Chart 11 : Beijing primary transaction prices and volumes Chart 12 : Shanghai primary transaction prices and
volumes
16,000 Oct ASP: Rmb:15,336 1,800 13,000 Oct ASP: Rmb:11,266 3,500
15,000 1,600 12,000 3,000
14,000 1,400
11,000 2,500
13,000 1,200
1,000 10,000 2,000
12,000
800 9,000 1,500
11,000 600 8,000 1,000
10,000 400
7,000 500
9,000 200
8,000 0 6,000 0
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09
GFA (RHS 000 Sqm) ASP (LHS Rmb) GFA (RHS 000 Sqm) ASP (LHS Rmb)
Chart 13 : Shenzhen primary transaction prices and Chart 14 : Chongqing primary transaction prices and
volumes volumes
12,000 300
3,000 1,000
200
10,000 100 2,500 500
8,000 0
2,000 0
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09
GFA (RHS 000 Sqm) ASP (LHS Rmb)
GFA (RHS 000 Sqm) ASP (LHS Rmb)
Chart 15 : Vanke monthly contracted sales and ASP Chart 16 : COLI monthly contracted sales and ASP
800 Nov 07 ASP: Rmb10,353 June 08 ASP: Sep 09: ASP 11,000 700 Dec 07 ASP: HK$ 14,607 16,000
Rmb10,308 Rmb 10,168 psm 14,000
700 600
10,000 July 08 ASP: HK$11,172
12,000
600 500
9,000 10,000
500 400
8,000
400 8,000 300 Feb 08 ASP: HK$7,029 Sep 09 ASP: HK$11,644 6,000
300 200 psm
4,000
7,000
200 100 2,000
100 6,000 0 0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 07H1 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09
GFA sold (000 sqm LHS) 3MA GFA sold GFA sold (000 sqm LHS) 3MA GFA
ASP (Rmb psm RHS) 3MA ASP ASP (Rmb psm RHS) 3MA ASP
Chart 18 : Growth of property investment and FAI (yoy) Chart 19 : Growth of GFA sold and GFA completed (yoy)
Chart 20 : Lending rates and stock index Chart 21 : Growth of developer and mortgage loans (yoy)
Table 2 : Selling price change in the primary markets of 10 major cities (mom)
Secondary mom Beijing Shanghai Guangzhou Shenzhen Hangzhou Nanjing Shenyang Tianjin Chengdu Chongqing National
Sep-08 -0.30% -0.90% -1.40% -5.60% -0.20% -2.90% 1.20% 0.10% -0.10% 0.00% -0.30%
Oct-08 -0.10% -0.30% -1.80% -2.50% -0.20% -0.80% 0.00% -0.20% -0.50% 0.50% -0.30%
Nov-08 -0.50% -0.40% -1.10% -2.40% 0.00% -2.20% -0.10% -0.10% -0.20% -0.80% -0.60%
Dec-08 -1.10% -0.30% -3.10% -0.20% -0.10% -0.40% -0.20% -0.50% -0.30% -0.40% -0.70%
Jan-09 -0.10% -0.10% 0.30% -0.20% -0.10% -0.10% -0.10% -0.30% -0.40% -1.10% -0.30%
Feb-09 -0.10% 0.00% -0.20% -0.10% -1.30% 0.00% 1.30% 0.20% -0.10% -0.20% -0.20%
Mar-09 0.20% 0.00% 0.20% 0.50% -0.10% 0.70% 0.30% 0.20% 0.40% 0.20% 0.10%
Apr-09 0.40% 0.10% 2.10% 2.00% -0.60% 0.20% -0.10% 0.30% 0.10% 0.10% 0.30%
May-09 0.50% 0.50% 1.40% 1.70% 0.70% 0.30% 0.10% 0.90% 0.70% 0.10% 0.70%
Jun-09 0.30% 1.00% 3.60% 0.90% 0.60% 0.30% 0.20% 0.90% 0.40% 1.10% 0.80%
Jul-09 1.40% 1.10% 2.70% 2.20% 1.20% 1.10% -0.10% 0.90% 0.40% 0.30% 1.10%
Aug-09 1.30% 1.20% 1.50% 1.60% 1.90% 1.00% 0.20% 2.00% 0.40% 1.30% 1.10%
Sep-09 0.40% 0.70% 1.40% 1.50% 2.00% 0.80% 0.40% 1.30% 1.20% 0.60% 0.80%
Source: National Development and Reform Commission
Table 3 : Price, PE multiples and NAV discounts of 15 property developers under our coverage
Target price Price Rating PE (x) NAV premium NAV/share (HK$) 2009F
(HK$) (HK$) 2009F 2010F 2011F 2009F 2010F 2011F 2009F 2010F 2011F gearing
COLI 21.32 17.96 Buy 24 17 16 84% 76% 72% 9.8 10.2 10.4 47%
CRLN 25.45 19.22 Buy 30 19 15 48% 39% 32% 13.0 13.8 14.6 45%
CGAR 3.16 3.21 Hold 19 16 14 107% 101% 95% 1.5 1.6 1.6 46%
GR&F 15.50 15.96 Hold 14 10 10 46% 41% 37% 10.9 11.3 11.7 128%
SHIM 17.11 15.20 Buy 24 17 11 56% 38% 33% 9.7 11.0 11.4 18%
SOHO 4.86 4.42 Hold 20 8 20 50% 70% 78% 3.0 2.6 2.5 -41%
AGIL 9.69 10.44 Hold 17 11 10 2% -5% -13% 10.2 11.0 12.0 15%
SINO 7.69 8.22 Buy 24 18 13 41% 27% 25% 5.8 6.4 6.6 40%
SHUI 4.24 4.91 Hold 10 21 19 31% 41% 13% 3.7 3.5 4.3 37%
FRAN 2.93 2.46 Buy 22 15 11 9% -5% -12% 2.3 2.6 2.8 35%
HOPS 10.28 15.10 Sell 10 9 9 -31% -39% -48% 21.9 24.8 28.8 60%
KWGP 4.59 5.89 Hold 17 16 11 -10% -15% -22% 6.6 6.9 7.6 19%
GREE 10.88 12.62 Hold 21 12 7 -44% -52% -51% 22.4 26.2 26.0 137%
CCLN 3.45 4.51 Sell n/a n/a n/a -26% -31% -38% 6.1 6.5 7.2 -12%
FORT 2.21 2.48 Hold 16 11 10 20% 5% -11% 2.1 2.4 2.8 154%
Note: Prices at close 20 October 2009 throughout the report. PE based on our estimated adjusted EPS; negative NAV premium means NAV discount
Source: ABN AMRO forecasts
Chart 22 : Price change (x-axis) vs forward consensus earnings change (y-axis), 17 April 2009 vs 16 October 2009
70%
Source: Datastream
Table 4 : Revenue, earnings, EBITDA and EPS forecasts for 15 China property developers under our coverage
100%
80%
60%
40%
20%
0%
-20%
COLI CRLN CGAR GR&F SHIM SOHO AGIL SINO SHUI FRAN HOPS KWGP GREE CCLN FORT
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
COLI CRLN CGAR GR&F SHIM SOHO AGIL SINO SHUI FRAN HOPS KWGP GREE CCLN FORT
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
COLI CRLN CGAR GR&F SHIM SOHO AGIL SINO SHUI FRAN HOPS KWGP GREE CCLN FORT
Note: Second-tier cities include Tianjin, Dalian, Qingdao, Hangzhou, Suzhou, Nanjing, Chongqing, Chengdu, Zhongshan, Xianmen, and 17 other cities.
Source: ABN AMRO forecasts
0% 2% 4% 6% 8% 10% 12% 0% 5% 10% 15% 20% 25% 0% 10% 20% 30% 40% 50%
Chart 29 : 12-month forward weekly rolling PE band based on consensus earnings forecasts
1,200 Thickest line = Market capitalization weighted RBS China Property Index
Highest = 24.4
1,000 19 October 2009 Index = 440, Forward PE =14.4x
+1STD = 15
-1STD = 7.4
600
Lowest = 4.9
400
200
-
Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09
Source: Datastream
China Resources Land (1109): Defensive with upside potential (21 September 2009)
Paul Rathband
+65 65187226
Email: [email protected]
Source: ABN AMRO
Distribution of recommendations
The tables below show the distribution of ABN AMRO's recommendations (both long term and trading). The first column displays the distribution of recommendations globally and the
second column shows the distribution for the region. Numbers in brackets show the percentage for each category where ABN AMRO has an investment banking relationship.
Long Term recommendations (as at 21 Oct 2009) Trading recommendations (as at 21 Oct 2009)
Global total (IB%) Asia Pacific total Global total (IB%) Asia Pacific total
(IB%) (IB%)
Buy 512 (3) 358 (1) Trading Buy 4 (0) 4 (0)
Add 0 (0) 0 (0)
Hold 378 (3) 228 (0)
Reduce 0 (0) 0 (0)
Sell 128 (0) 84 (0) Trading Sell 1 (0) 1 (0)
Total (IB%) 1018 (3) 670 (0) Total (IB%) 5 (0) 5 (0)
Source: ABN AMRO Source: ABN AMRO
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