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1、,October 21,2010China:Real Estate Developers2011 outlook:Volume names to outperform;Buy Evergrande,VankePrices to decline;achieving volume is the key growth driver,We think the tug-of-war between the government,developers,and homebuyers,OUR BASE,BEAR-CASE VALUATIONS,may continue for some time,but in
2、 a local central government synchronized,12-M target price,Bear-casevaluation,policy environment and with gradually rationalizing homebuyer sentiment,we,19/Oct,Rating,LCY,Potentialupside/downside,Impliedupside/downside,expect developers weakening balance sheets,but rising inventory to eventuallyhave
3、 an effect on selling prices.We expect property prices to decline 20%fromcurrent levels over the next 12 months.We retain our 10%p.a.price increaseforecast for 2012E/2013E as we believe price recovery in future will be limited bygovernment policies until a meaningful scale of social housing is built
4、.Consequently,we believe achieving asset turnover will become more importantthan price when it comes to driving earnings growth and stock valuations.Key themes:Exposure to central/western China,brand,strong B/SWe expect our coverage universe to increase market share amid a prolongedindustry slowdown
5、 and to improve their medium-term earnings growthvisibility.In particular,we are more positive on names that are(1)rapidlyexpanding their exposure to central and western China and(2)focusing on,FantasiaEvergrandeAgileVanke(A)Poly HKSino OceanPolyGemdaleVanke(B)Country GardenCRLCOLIFranshionE-HousePo
6、werlongYanlordForteSOHOR&FShimaoFinancial StreetShui On LandHuafaKWGCMP(A)GreentownSZInvCWTCOCTIFMAverage,1777.HK3333.HK3383.HK000002.SZ0119.HK3377.HK600048.SS600383.SS200002.SZ2007.HK1109.HK0688.HK0817.HKEJ1238.HKYNLG.SI2337.HK0410.HK2777.HK0813.HK000402.SZ0272.HK600325.SS1813.HK000024.SZ3900.HK060
7、4.HK600007.SS000069.SZCTC,BB*BB*BBBBBBBNNNNNNNNNNNNNNSSSSS*,HK$HK$HK$RmbHK$HK$RmbRmbHK$HK$HK$HK$HK$US$HK$S$HK$HK$HK$HK$RmbHK$RmbHK$RmbHK$HK$RmbRmbUS$,2.425.0814.6012.6811.247.2319.009.0013.583.5019.8119.772.8219.972.451.912.506.7212.6513.777.504.1512.806.5018.808.192.4010.0111.503.95,79%54%38%33%28%
8、27%25%24%23%22%19%16%9%8%7%7%6%5%4%1%-1%-2%-2%-3%-6%-9%-16%-17%-18%-29%11%,2.103.8110.518.848.946.8014.157.9611.062.4415.0115.992.5816.702.351.702.165.6110.8511.157.093.7712.385.4018.096.421.949.8011.293.30,56%16%-1%-7%2%19%-7%9%1%-15%-10%-6%-1%-10%3%-5%-9%-12%-11%-19%-6%-11%-5%-19%-9%-29%-32%-19%-1
9、9%-41%-7%,improving their product quality/property management to enhance product,attraction.Moreover,we believe that listed developers(3)with strong balancesheets,good access to capital,and strong execution skills are more likely to be,*Denotes that this stock is on our Regional Conviction List.B=Bu
10、y,N=Neutral,S=Sell.Source:Datastream,Gao Hua Securities Researchestimates.,industry consolidators in the future.RELATED RESEARCH,Rolling over valuations to 2011E;prefer Evergrande and Vanke(A)We introduce(1)our end-2011E NAV estimates,which now factors in our newprice assumptions(largely the same ma
11、gnitude as our previous estimate butpushed back to 2011),further Rmb appreciation,and recent acquisitions bydevelopers and(2)our scorecard for developers based on the key themesabove.As a consequence,we adjust our TP discount to NAV based on thescorecard by+/-10ppt,revise our TPs for the sector by a
12、n average of 27%,andrevise our 2010E-2012E underlying EPS forecast by 8%-14%.We upgrade Country Garden and Sino-Ocean to Buy;Forte to Neutral;removeSZI from our Conviction Sell List but maintain our Sell rating on the stock;downgrade Powerlong to Neutral;retain our Buy ratings on Evergrande(onBuy,CL
13、),Agile,CRL,Poly HK;Vanke A/B(A is on Buy,CL),Poly,Gemdale,andFantasia.Evergrande,and Vanke A remain our top Buys(on Buy,CL);retain ourSell ratings on Greentown,OCT,CWTC,and IFM.IFM is our top Sell(on Sell,CL).Key risks:Upside:Stronger-than-expected volume growth;potential M&A.Downside:Unexpected go
14、vernment policy tightening and a macro hard landing.,Sept 29,2010,Reiteration of tightening on five aspectsSept 20,2010,Social housing-A new growth focusSept 20,2010,Trip takeaways:volume recovery to sustainunless policies changeJune 24,2010,Short-term pain,long-term gain(Part 2);prefer Evergrande,V
15、anke(A)May 19,2010,Short-term pain,long-term gain;addEvergrande,Vanke A to C-BuyFebruary 22,2010,Reshuffling picks on new risk/rewardanalysis amid tightening,Yi Wang,CFA+86(21)2401-8930 Beijing Gao Hua Securities Company LimitedJason Sun+86(10)6627-3187 Beijing Gao Hua Securities Company LimitedVick
16、y Li+86(21)2401-8926 Beijing Gao Hua Securities Company LimitedThe Goldman Sachs Group,Inc.,The Goldman Sachs Group,Inc.does and seeks to do business withcompanies covered in its research reports.As a result,investors shouldbe aware that the firm may have a conflict of interest that could affectthe
17、objectivity of this report.Investors should consider this report asonly a single factor in making their investment decision.For Reg ACcertification,see the end of the text.Other important disclosures followthe Reg AC certification,or go to employed by non-US affiliates are not registered/qualified a
18、sresearch analysts with FINRA in the U.S.Global Investment Research,2,6,8,13,22,24,2,October 21,2010,China:Real Estate Developers,Table of contentsOverview:Still a difficult path ahead;volume names to outperformFine tune our forecasts;rollover NAV-based TPs to end-2011EPrice to decline on accelerati
19、ng inventory builds upOur top picks:Buy Evergrande and Vanke(A);Sell IFMAppendix I:Quantitative analysis to derive our scorecardAppendix II:HPR,breakdown,land acquisition analysis,and development activitiesThe prices in the body of this report are based on the market close of October 19,2010.The aut
20、hor would like to thank Jacqueline Du for her contribution to this report.Overview:Still a difficult path ahead;volume names to outperformPolicy intervention on price unlikely to ceaseWe expect housing upgrades and investment demand in Chinas main cities(Tier-1/Tier-2)to remain vibrant given an envi
21、ronment of low real interest rates,limited investmentchannels versus a backdrop of rapid wealth accumulation by high-net-worth individuals(see our report dated June 24,2010,“Short-term pain,long-term gain(Part 2);preferEvergrande,Vanke A”).This indicates to us that the governments decision to interv
22、ene inthe market is unlikely to cease until a more meaningful scale of social housing is developed(we believe this is one of the key objectives of the governments policy tighteningmeasures).Apart from the recent restriction on home purchases across several cities in China(whichcould be expanded to i
23、nclude additional coastal cities),we think a property holding tax(which was introduced in 1986 but not implemented)could be revived and implemented insome of Chinas larger cities in the future.Weakening balance sheets,increasing inventory levels,and a decline in demandwill eventually have a knock-on
24、 effect on priceAlthough property prices have not come down much from the March/April peak(pricesdeclined in May and June and then recovered from late June onwards),we expectheightened policy tightening measures,developers weakening balance sheets,andgrowing inventory levels to eventually have a kno
25、ck-on effect on property prices.Weexpect property prices to continue their downward spiral over the next 12 months withlower-quality properties in non-core areas of these cities being impacted harder.Goldman Sachs Global Investment Research,3,October 21,2010,Exhibit 1:Summary of our new price/volume
26、 assumption,China:Real Estate Developers,Base-case:,Price change,Volume change,from average 09,yoy,yoy,yoy,yoy,yoy,yoy,2010E,2011E,2012E,2013E Afterwards,2010E,2011E,PreviousCurrent,0%10%,5%0%,10%10%,10%10%,0%Previous0%Current,-30%-30%,50%35%,Spot price change200,180,173,160140,150,155,Base-case,124
27、,120100,100806040200,Bear-case,105,Beginning-2009,End-2009,Peak(Mar/Apr 2010),Current,End-2011E,Note:(1)Price change are all base on prior years average level.Comparing with current levels,we expect a 10%-20%decline from now until end-2011E.YTD,prices have fallen 0%-10%from peak levels in March/Apri
28、l but below our previousestimate of 25%-30%.We now push back price decline to 2011.(2)The volume assumption is for the market,for ourcoverage universe,we estimate average 11%volume increase in 2011E,mainly driven by new project launches(or weexpect our coverage universe to grow market share).For exi
29、sting projects,we assume a 10%-30%volume drop or a lowersales rate from 2009-2010E but higher than 2H08.Source:Gao Hua Securities Research estimates.Although we assume volume growth will increase 35%in 2011E from 2010E,we actuallyforecast a declining sales rate in 2011E from 2009 and 2010E levels.Th
30、at said,we expectthe sales rate in 2011E to be better than 2H08 given a stronger macro backdrop.Volume names to be the main beneficiaries in a price-controlled environmentWe believe that developers that are focused on achieving fast asset turn will be best placedin a price-controlled environment,par
31、ticularly those that have exposure to cities in the keyeconomic hubs of central and western China,have a more appealing brand/product,and astrong financial position.We believe those developers are most likely to outperformmargin names in the years ahead,in terms of earnings growth.Right regions:Coas
32、tal cities with supply overhang may encounter more consolidation,inour view.Our preferred geographical focus is central and western China.We reiterate our view that we expect coastal cities property markets to be more volatile,given increased policy intervention recently,as a result of there being a
33、 higher percentageof multiple property purchases/investment/speculation in these areas.Conversely,and ashighlighted in our report dated June 24,2010,“Short-term pain,long-term gain(Part 2);Goldman Sachs Global Investment Research,4,October 21,2010,China:Real Estate Developers,prefer Evergrande,Vanke
34、 A”),we feel there is more volume growth potential to be had incentral and western China.Brand/product:With restrictions of additional property unit purchases now in place in acouple of cities(we expect other coastal cities to follow suit),we believe competitionbetween developers on prospective home
35、buyers along coastal areas,which accounts forabout an average of 60%of our coverage universes 2011E contract sales,is likely tointensify substantially.As a consequence,we believe product competitiveness and brandrecognition are crucial for developers(with exposure to coastal areas)if they are tomain
36、tain their sales performance.Balance sheet strength:Being disciplined when it comes to managing cash flow becomesmore important for homebuilders amidst policy tightening cycles and prolonged industryslowdown.We think developers with fast asset turnover,low-cost land bank/disciplinednew land acquisit
37、ions are more likely to maintain a healthy balance sheet and becomepotential industry consolidators.Exhibit 2:Our top picks are Evergrande and Vanke(A)among our offshore and onshore coverage,respectivelyScorecard of our coverage universe(see Appendix I for quantitative analysis to derive our scoreca
38、rd),Company,Key themes(60%weighting),Other(40%weighting),Total score Rank,TP,Product/brand,2011E,2011E,discount,Remark,Regional,appeal in local,Financial,contract sales,earnings,to NAV,focus,market,position,diversification lock-in ratio Margin trend,Off-shore coverage,EvergrandeFantasiaCRLCOLISOHO C
39、hinaCountry GardenAgilePoly HKFranshionSino OceanKWGYanlordShimaoShui On LandForteR&FPowerlongGreentownSZInv,5433343332233333423,4444434443453423151,4435543244342211412,5444132414224333322,4251533334412253143,4534335443424333212,13121111111010101010999988886,1234467888111213141516171819,-40%-50%-20%
40、-20%-30%-30%-30%-30%-30%-40%-40%-40%-40%-50%-50%-50%-60%-50%-40%,New listco.New listco.Large commercial property exposureLarge commercial property exposureNew listco.The timetable for asset injection is more visible,On-shore coverage,PolyVanke(A),54,44,45,55,53,34,1313,12,-30%-30%,Vanke(B)GemdaleCMP
41、HuafaOCTFinancial StreetCWTC,4424223,4433423,5433122,5341231,3444523,4232341,131199877,2465798,-40%-40%-50%-50%-40%-40%-30%,Historically tranded at discount to Vanke(A)Exposure to commerical property and tourismLarge commercial property exposurePure commercial property exposure,Note:5:Best;4:Above a
42、verage;3:Average;2:Weaker;1:Worst.Source:Gao Hua Securities Research estimates.Goldman Sachs Global Investment Research,October21,2010,GoldmanSachsGlobalInvestmentResearch,5,China:RealEstateDevelopers,-,-,Exhibit 3:Evergrande,Vanke(A)remain our top Buys.We upgrade Country Garden,Sino-Ocean to Buy;Fo
43、rte to Neutral;remove SZI from our Conviction SellList but retain our Sell rating on the stock;downgrade Powerlong to NeutralComparative valuation tableEPS,Company,Ticker,Mkt,Price as of,Potential,Target,End-11Eexisting,Share price,Bear-casevaluation,FD Core P/E(x),Growth(%),P/B(x),Dividend yield(%)
44、,Cap,12 mth,upside/,price,NAV per,(disc)/prem,implied,(US$,Price,downside,disc.to,share,to End-11E Bear-case upside/(downsi,09A-,bn),Rating,19/Oct/10,target,(%),NAV,(LCY),NAV(%),valuation,de)(%),10E,11E,12E,12E,10E,11E,12E,10E,11E,12E,Hong Kong Listed,Agile PropertyChina Overseas LandChina Resources
45、 LandCountry GardenEvergrandeFantasiaFranshionGreentown ChinaGuangzhou R&F PropertyKWGPoly HKPowerlongShanghai Forte LandShenzhen InvestmentShimao PropertyShui On LandSino OceanSOHO China,3383.HK0688.HK1109.HK2007.HK3333.HK1777.HK0817.HK3900.HK2777.HK1813.HK0119.HK1238.HK2337.HK0604.HK0813.HK0272.HK
46、3377.HK0410.HK,4.917.910.86.06.30.82.91.95.02.53.40.90.81.26.32.94.14.5,BuyNeutralBuyBuyBuy*BuyNeutralSellNeutralNeutralBuyNeutralNeutralSellNeutralNeutralBuyNeutral,10.58(HK$)17.08(HK$)16.68(HK$)2.86(HK$)3.29(HK$)1.35(HK$)2.60(HK$)9.01(HK$)12.16(HK$)6.67(HK$)8.77(HK$)2.28(HK$)2.37(HK$)2.84(HK$)13.7
47、0(HK$)4.22(HK$)5.71(HK$)6.40(HK$),14.6019.7719.813.505.082.422.828.1912.656.5011.242.452.502.4013.774.157.236.72,3816192254799(9)4(3)2876(16)1(2)275,-30%-20%-20%-30%-40%-50%-30%-50%-50%-40%-30%-60%-50%-40%-40%-50%-40%-30%,20.8624.7224.764.998.474.844.0416.3825.3010.8416.066.125.003.9922.958.2912.049
48、.61,(49)(31)(33)(43)(61)(72)(36)(45)(52)(38)(45)(63)(53)(29)(40)(49)(53)(33),10.5115.9915.012.443.812.102.586.4210.855.408.942.352.161.9411.153.776.805.61,(1)(6)(10)(15)1656(1)(29)(11)(19)23(9)(32)(19)(11)19(12),11.514.923.213.07.67.517.26.39.913.922.67.32.69.513.922.011.29.7,9.013.217.910.55.15.226
49、.26.88.510.418.16.85.712.211.124.812.222.7,7.513.315.59.44.03.414.63.210.49.614.85.95.111.29.115.710.49.6,30%17%20%25%190%64%16%56%8%35%39%-6%30%4%9%-11%31%20%,1.72.81.91.72.51.31.31.11.81.51.50.70.70.81.60.91.11.5,1.42.41.81.51.71.01.51.01.51.21.40.60.60.71.40.81.11.4,1.32.11.61.31.30.81.40.81.41.1
50、1.30.60.50.71.20.81.01.2,3.21.41.51.53.52.81.14.84.00.40.93.03.84.20.72.22.14.1,2.81.51.41.94.93.80.64.44.70.51.13.43.53.30.90.81.62.2,4.01.51.62.16.35.81.09.33.90.51.43.43.93.61.11.31.93.4,Simple average,16,(46),(4),12.4,12.6,9.6,32%,1.5,1.3,1.1,2.5,2.4,3.1,A/B-share listed,China Merchants Property
