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1、Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Sell,Sell,Buy,Deutsche BankMarkets Research,AsiaChinaPropertyProperty,IndustryChina Property,Date8 October 2012Industry UpdateTony TsangJason Ching,CFA,Taking a deeper look at property salesin Golden WeekGolden Week sales down 71%WoW in 19 key citiesAccording to i
2、nitial data from Soufun,contracted sales(in sqm)in 19 key citiesshowed a 9%YoY growth.However,compared with the week before GoldenWeek(24-30 Sept,2012),contracted sales were down by more than 70%WoW.While we recognize that preliminary sales data is subject to furtherrevision,the rather muted conditi
3、on of the property market is a reality now.Initial feedback from major developers shows similar trend in Golden WeekBased on initial feedback from 13 developers that we surveyed,mostdevelopers said that Golden Week is becoming more like normal holidays,rather than the peak season of earlier years.De
4、velopers believe consumers aremore mature these days and are becoming less likely to concentrate homepurchase decisions during Golden Week,but developers are now adopting amore flexible sales strategy and relying less on the Sept/Oct or Autumn tradefairs to boost sales.However,most developers still
5、expect stable sales/sell-through rates in Golden Week/October,compared with the sales performancein September.Centaline Golden Week sales down 70%WoW in 54 cities,Research Analyst Research Analyst(+852)2203 6256(+852)2203 Top picksCOLI(0688.HK),HKD19.80China Resources Land(1109.HK),HKD17.14China Ovs
6、 Grand Oceans(0081.HK),HKD8.00Country Garden Holdings(2007.HK),HKD2.98Guangzhou R&F Prop(2777.HK),HKD8.89Companies FeaturedPOLY PROPERTY(0119.HK),HKD4.22Guangzhou R&F Prop(2777.HK),HKD8.89Kaisa(1638.HK),HKD1.42Sino Ocean(3377.HK),HKD4.49Yanlord Land(YNLG.SI),SGD1.24C C Land(1224.HK),HKD1.71Agile Pro
7、perty(3383.HK),HKD8.88,According to preliminary sales data compiled by Centaline,primary sales in 54major cities totaled 16,000 units during the Golden Week holiday,or a sizeabledecline of about 70%WoW from 54,000 units contracted during the weekbefore the Golden Week holiday.While Centaline admitte
8、d that the preliminarysales data is subject to further revision as data in some cities is yet to beavailable,the rather muted condition of the property market is a reality now.Lack of catalysts from sales in the near termIn our view,as most people in China were on holiday,there could be somedelays i
9、n property registrations,so the sales details available may not be tellingthe true picture.In addition,with the free toll road access offered in the GoldenWeek,a lot more people have been travelling during the holidays,and hencefew are looking at properties.Furthermore,with developers already achiev
10、inga high percentage of their full-year sales targets,they may not be that activeon sales for the rest of this year.Overall,we believe property sales in Octoberare unlikely to show a significant pickup versus September.Fundamentals have improved:be selectiveThe China property sector currently trades
11、 at a 53%NAV discount,7.5x P/E,and 0.9x P/B,all close to or below the“-1SD”level of the historical ranges(since 2009,taking out the bull market data points in 2006-07).With improvingfundamentals,we expect more mean-reversions in valuations of the Chinaproperty stocks.In addition to long-term leaders
12、 such as COLI,CR Land,andCOGO,we recommend picking up developers with moderately high netgearing/cheap valuations and/or accelerating sales momentum,such asCountry Garden,R&F and KWG.As a hedge,we recommend selling SinoOcean and Yanlord.We derive our target prices from NAV and DCF.Key risks:widespre
13、ad financial distress and a sharp deterioration in the global economy._Deutsche Bank AG/Hong KongAll prices are those current at the end of the previous trading session unless otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deut
14、sche Bank and subjectcompanies.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a sing
15、le factor in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,8 October 2012PropertyChina PropertyGolden Week sales not sogoldenGolden Week sales down 71%WoW in 19 key citiesAccording to initial data from Soufun,contracted sales(in
16、sqm)in 19 key cities showeda 9%YoY growth.However,compared with the week before Golden Week(24-30 Sept.2012),contracted sales were down by more than 70%WoW.While we recognize thatpreliminary sales data is subject to further revision,the rather muted condition of theproperty market is a reality now.D
17、ata from other sources such as Centaline(showed insubsequent section of this report)also shows a similar WoW declining trend.Figure 1:Golden Weeks sales in key cities(ksqm),Oct1-7,2012,Oct1-7,2011,YoYChange,24-30Sep12,WoWChange,BeijingShanghaiShenzhenNanjingChengduFuzhouSuzhouQingdaoXiamenGuiyangDon
18、gguanHuizhouChongqingWuhanKunmingNingboXuzhouYangzhouLianyungang,47.376.530.150.445.831.560.383.7149.380.130.111.592.3108.028.48.163.817.742.2,94.657.020.821.347.417.570.469.924.653.496.964.889.7144.311.45.147.16.131.3,-50%34%45%137%-3%80%-14%20%507%50%-69%-82%3%-25%149%59%35%190%35%,417.8234.163.31
19、85.3195.379.4266.7194.3152.5183.8110.798.9610.2198.7185.8136.9262.229.880.4,-89%-67%-52%-73%-77%-60%-77%-57%-2%-56%-73%-88%-85%-46%-85%-94%-76%-41%-48%,Average,9%,-71%,Source:Soufun,Deutsche BankInitial feedback from 13 developers shows similar trend in Golden WeekBased on the initial feedback from
20、13 developers that we surveyed,most developerssaid the Golden Week is becoming more like normal holidays,instead of the propertysales peak season in earlier years.On the one hand,developers believe consumers aremore mature these days and less likely to concentrate their home purchase decisions inthe
21、 Golden Week.On the other hand,developers are now adopting a more flexible salesstrategy,instead of relying on the peak selling season or the Autumn trade fairs toboost sales.Having said that,most developers still expect stable sales/sell-throughrates in the Golden Week/October,compared with the sal
22、es performance in September.,Page 2,Deutsche Bank AG/Hong Kong,COLI,COGO,8 October 2012PropertyChina PropertyFigure 2:Developers feedback on September/Golden Week sales,Company,Stock code0688.HK,September salesSell-through rate is quite stable compared with the earliermonths of 2H12,Golden Week sale
23、sGolden Week is not the market focus these days asconsumers have become more mature these days and,developers are not relying on this period to boost sales.During the Golden Week,the sell-through rate is quitestable compared with the earlier months of 2H12.,0081.HK,Sell-through rate is quite stable
24、compared with the earliermonths of 2H12,Golden Week is not the market focus these days asconsumers have become more mature these days anddevelopers are not relying on this period to boost sales.During the Golden Week,the sell-through rate is quitestable compared with the earlier months of 2H12,China
25、 VankeCR LandC.Garden,000002.SZ1109.HK2007.HK,Better than July and AugustRmb3.5-4bnSlightly better MoM,as some major launches were,Better YoY and better than the best week in SeptemberMajor projects have been received quite well this year,delayed to the Golden Week to two weeks after that,Evergrande
26、,3333.HK,Rmb8bn,Better YoY,R&F,2777.HK,Stable sales compared with previous months due to lack of Sales should be better YoY,even though the companynew launches during the month.However,the companybelieves more people went on a holiday due to the freebelieves major focus will be in October,with moreh
27、ighway policy in China this yearlaunches planned,Agile,3383.HK,Better MoM,No exact data yet,but this year is better in terms of foot,traffic in show flats and buyers sentiment.No majorlaunch during the Golden Week,Sino-oceanGreentown,3377.HK3900.HK,Stable MoM5bn presales,better MoM,Subscription is b
28、etter YoYApproximately Rmb100m/day,better YoY,but has slowed,compared with the first week of September,Poly Property,0119.HK,Stable/slightly better MoM,Believes sales should be quite evenly spread across the,weeks in October,and it is not really focusing to push theGolden Week sales,Sunac,1918.HK,Rm
29、b3bn,Sales momentum is stable better MoM and definitely,better YoY.October sales is likely better MoM,Kaisa,1638.HK,Rmb1.6bn,Golden Week sales are not the market focus these days.,Initial evidence suggests volume in Shenzhen is not activeduring the Golden Week this yearSource:Company,Deutsche BankLa
30、ck of catalysts from sales in the near termIn our view,as most people in China were on holiday,there could be some delays inproperty registrations,and so the sales data available may not be telling the truepicture.In addition,with the free toll road access offered in the Golden Week,a lotmore people
31、 were travelling during the holidays,and hence fewer were looking atproperties.Furthermore,with developers already achieving a high percentage of theirfull-year sales targets,they may not be that active on sales for the rest of this year.Overall,we believe property sales in October are unlikely to s
32、how a significant pickupversus September.,Deutsche Bank AG/Hong Kong,Page 3,8 October 2012PropertyChina PropertyCentaline Golden Week sales down 70%WoW in 54 citiesAccording to preliminary sales data compiled by Centaline,primary sales in 54 majorcities totaled 16,000 units during the Golden Week ho
33、liday,or a sizeable decline ofsome 70%WoW from 54,000 units contracted during the week before the GoldenWeek holiday.While Centaline admitted that the preliminary sales data is subject tofurther revision as data in some cities is yet to be available,the rather muted conditionof the property market i
34、s a reality now.Transaction volumes in Tier-1 cities not goodIn particular,secondary sales volume in Beijing in the 3-day period prior to the NationalDay holiday was registered at 137 units,a notable decline from a typical day over thepast month.According to 5i5j,a major property agent in Beijing,th
35、e property-viewing-hit rate(the percentage of property visits that finally turned into successful transactions)in this Golden Week for the secondary market in Beijing has also fallen to a record lowversus the past Golden Week holidays,reflecting strong“wait-and-see”attitudesamong prospective homebuy
36、ers.For other cities,while the pedestrian flow in theShanghai Autumn Property Exhibition was strong,actual sales volumes were rathersluggish.In Guangzhou,total volume in the Golden Week(Sept 30 Oct 3)was 490units,a decline of 36%YoY from 272 units year ago.Tier-2/3 cities also saw no pickupMeanwhile
37、,according to Centaline,Qingdao,Hangzhou,Jinan,Wuhan,Kunming,Xuzhou and Chongzhou also saw marked YoY decline in sales during the Golden Week.Centaline believes that the availability of mortgage credit is still the key element forproperty prices.In particular,if there is no apparent easing in the av
38、ailability of credit in4Q,sales are expected to remain only steady for the rest of 2012.YoY growth in sales should not be relevantSome market participants highlighted that there was moderate YoY growth in sales yet,in our view,that should be expected as last years sales volumes were on a lowbase.On
39、the other hand,most cities showed declines versus sales in the week beforethe Golden Week holiday.Other anecdotal reports suggest similar muted sales responseduring Golden WeekThe October National Day Golden Week(Sep 30-Oct 7)Holiday has just passed,andbased on the latest media reports(like Hexun,Si
40、na,Baidu,JRJ.com)available,therewere no meaningful pickup in sales during the holiday versus the period before theholidays,giving initial evidences that,like September,sales in October might showmuch pickup versus the August levels.Sales updates of key citiesIn Beijing,212 units were sold in the sec
41、ondary market during the first 7 days of GoldenWeek holidays(until Oct 6),up 61.8%YoY,but were down significantly versus thenormal days before the holiday.In Guangzhou,there were 731 units sold during Sep 30-Oct 5,down 70.8%versus the6 days before the National Day holidays.In Hangzhou,only 204 units
42、 were sold in the main urban districts in the first three days(Sep 30 Oct 2),even less than half of the sales volume on the last trading day ofSeptember.,Page 4,Deutsche Bank AG/Hong Kong,8 October 2012PropertyChina PropertyIn Shenzhen,in the 5-day Autumn Property Trade Fair,responses were relativel
43、y muted,and only 20 local projects were shown in the exhibition.According to Centaline,only 25units were sold in Shenzhen on Sep 30,10 units sold on Oct 1,2 on Oct 2,and 1 on Oct3.In Kunming,during the first 6 days(Sep 30 Oct 5)387 units were sold in the maindistricts less than the sales volume in t
44、he normal days.In Hainan,as reported in Hexun,there were very few visitors in the sales offices of keyprojects,and sales performances were not good.Chongqing reportedly sold 149,500sqm of primary commodity property from 30 Sep-7Oct:Hexun reported from Chongqing city MLR website data that from 30 Sep
45、-7 Octtransactions for primary commodity properties in the main city area stood at 1,670 unitsand 149,500sqm,both were up 100%YoY due to one extra holiday this year and lowbase effect from Home Purchase Restriction policy in prior years.Jinan property sales were down over 30%during the Golden Week h
46、olidays:Accordingto Baidu news,a total of 201 commodity residential units were sold during the GoldenWeek holidays,down over 30%YoY.,Deutsche Bank AG/Hong Kong,Page 5,8 October 2012PropertyChina PropertyAnother look at“Golden September Silver October”While traditional wisdom in the property industry
47、 describe September&October as thepeak season in property sales(the two months are dubbed as“Golden September SilverOctober”),it is worth considering what it really means for investors in general.During the past 4 years(2008-2011),for the 31 key developers that we keep track of,property sales during
48、 Sep-Oct accounted for 15-24%of their respective full-yearcontracted sales in general,which indicates that sales performance in the two monthsare important to developers.But again,with developers already achieving a high%oftheir full-year sales targets,they may not be that active on sales for the re
49、st of this year.So,we believe property sales in Oct are unlikely to show a significant pickup versusSept.Figure 3:Contracted sales of major developers(Rmb/HK$m),2008,2009,2010,2011,Company,Sep,Oct,Full-,Sept,Sep,Oct,Full-,Sept,Sep,Oct,Full-,Sept,Sep,Oct,Full-,Sept,year,&Oct/,year,&Oct/,year,&Oct/,ye
50、ar,&Oct/,full-year(%),full-year(%),full-year(%),full-year(%),(HK$/RMB m),COLI(HK$)China VankeCR LandPoly CNLongforC.GardenEvergrandeShimaoGemdaleAgileSino-OceanGreentownCOGO(HK$)YuexiuPoly HKKWGSunacR&FGloriousKaisaShenzhen InvYuzhouChina SCEPowerlongCentral ChinaC C LandFantasiaMinmetalsAoyuanBC La
