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1、,N,N,Financial Institutions GroupChina Real Estate,Rerating to continue,fuelled by reignited,abcGlobal ResearchDerek Kwong*AnalystThe Hongkong and Shanghai Banking,China Real EstateStaying powerValuation summaryBbg Share HSBC TP(Disc)/prem _ Core PE _Company ticker Price rating to NAV FY12e FY13e(HK
2、D)(HKD)(%)(x)(x),growth expectations Modest ASP increase and narrowerdiscount to NAV to drive sector valuation Conviction picks:COLI,Longfor,ShimaoImproving risk profile driving further sector rerating.We expect thesector to continue rerating after a strong performance in 2012,as a stablepolicy envi
3、ronment,easier access to funding and more promising contracted,Corporation Limited+852 2996.hkMichelle Kwok*AnalystThe Hongkong and Shanghai BankingCorporation Limited+852 2996.hkStanley Cheung*AnalystThe Hongkong and Shanghai BankingCorporation Limited,AgileCOLICRLCGFranshionGZ R&FKWGLongforShimaoS
4、hui On LandSino OceanSOHOYanlord*,3383 HK688 HK1109 HK2007 HK817 HK2777 HK1813 HK960 HK813 HK272 HK3377 HK410 HKYLLG SP,11.024.222.83.92.813.95.914.416.03.76.27.01.6,OW(V)OWOWOW(V)OWOW(V)OW(V)OWOW(V)NN(V),13.830.628.04.73.618.47.319.421.23.96.47.11.8,(49)(13)(15)(22)(57)(43)(67)(44)(35)(64)(37)(39)(
5、40),7.112.216.49.312.08.04.012.09.918.516.79.016.0,6.49.913.58.29.07.46.110.48.010.813.08.312.5,sales growth prospects in 2013e improve the risk profile.Pricing power to return in affluent regions.We believe the operatingenvironment has markedly improved since 2H12,as genuine buyers havegiven up the
6、 waiting game,leading to a clearance of inventory in majorcities.In our view,there will be a gradual return of pricing power in first-andsecond-tier cities,which bodes well for listed developers.Modest price growth to drive up NAVs and TPs.We expect first-andsecond-tier residential and commercial pr
7、ices to grow by 10%y-o-y in 2013,+852 2822.hkRuth Leung*AssociateThe Hongkong and Shanghai BankingCorporation Limited+852 3941.hkGanesh Siva*Associate,BangaloreView HSBC Global Research at:http:/,Source:Bloomberg,HSBC estimates.Prices as of close of 25 Jan 2013.*SGD30 January 2013,resulting in a 12%
8、increase in forward NAV.We believe improvedprospects for growth will drive a narrowing of the discount to NAV backto 2010 levels.We raise our target prices by an average of 32%.Conviction picks:COLI,Longfor and Shimao.Based on our scorecardanalysis,COLI and Longfor lead the sector based on measures
9、including assetturn,sales execution and balance sheet strength.We expect COLI to continueto outshine others in terms of sales execution and cost of capital advantage.Longfor will embark on its next stage of growth after its mega acquisitionsand equity fundraising in 2012.We believe Shimao will conti
10、nue to deliverstrong contracted sales and organically deleverage,enabling it to take onmore growth opportunities.We upgrade CRL to OW from N(V)and Shimaoto OW(V)from N(V),and downgrade Sino Ocean to N(V)from OW(V).,*Employed by a non-US affiliate ofHSBC Securities(USA)Inc,and is notregistered/qualif
11、ied pursuant to FINRAregulations.Issuer of report:The Hongkong andShanghai BankingCorporation LimitedDisclaimer&DisclosuresThis report must be readwith the disclosures andthe analyst certifications inthe Disclosure appendix,and with the Disclaimer,which forms part of it,6,42,57,24,76,79,28,Financial
12、 Institutions Group30 January 2013Contents,abc,Still another leg upComprehensive evaluation,Ratings and risksFinancials and valuation,36,weighted scorecardNAV and target discountadjustmentsEarnings estimate revisionsThe great balancing act,1520,AppendixKey company statisticsKey property sector stati
13、sticsDisclosure appendixDisclaimer,5664,acquisition vs.balance sheetReality check on the physical,market,32,With this report,Derek Kwong assumes coverage of SinoOcean and Stanley Cheung assumes coverage of Yanlord.2,ShuionLand,Franshion,Yanlord,Shimao,Longfor,KWG,R&F,CG,SOHO,COLI,Agile,CRL,3,Financi
14、al Institutions Group30 January 2013Key charts,abc,Market share of key developers*,Developers net gearing(ex-restricted cash)and cash level,Weighted cost of debt,as of December 2012,16%14%12%10%8%6%4%,8.9%5.0%,8.9%5.3%,11.6%7.0%,12.4%8.0%,13.6%9.0%,12010080604020,(RMB bn),(%),100%80%60%40%20%,12%9%6
15、%3%0%,2%,0,0%,2008,2009Spread,2010Top 12,2011,2012Top 5,2005 2006 2007 2008 2009 2010 1H112011 1H12Cash-ex.restricted(LHS)Net Gearing(RHS),*Top 12 key developers include Agile,COLI,CRL,Country Garden,Evergrande,Gemdale,GZRF,KWG,Longfor,Poly(A share),Shimao,Vanke*Top 5 developers are the companies(am
16、ong Top 12)with best selling performance ofthe corresponding yearSource:Company data.CEICNAV discount chart60%40%20%0%-20%-40%-60%-80%,Source:Company data,HSBCPB chart54321,Source:HSBC estimatesPE chart605040302010,2007,2008 2009%to NAVMean,2010,2011,2012+1 SD-1 SD,0,97,99,01,03,05,07,09,11,0,97,99,
17、01,03,05,07,09,11,13,Source:Company data,HSBC estimates,Note:simple average,Source:Company data,HSBC estimates,Source:Company data,HSBC estimates,Old,Company,4,Financial Institutions Group30 January 2013Changes in ratings,NAVs and target prices(Share price as of 25 January 2013),abc,Rating _ Forward
18、 NAV _ Target Discount _ _ Target Price _New Old New%Chg Old New%Chg Old New%Chg,Potentialreturn*,Implied PEFY13e Share price,AgileCOLICRLCGFranshionR&FKWGLongforShimaoShui on LandSino OceanSOHOYanlord,OW(V)OW(V)N(V)OW(V)OW(V)OW(V)OW(V)OW(V)N(V)N(V)OW(V)N(V)N(V),OW(V)OWOWOW(V)OWOW(V)OW(V)OWOW(V)NN(V
19、)NN,19.025.124.04.65.821.515.423.421.78.88.810.52.4,21.627.826.75.06.524.517.725.824.610.29.911.52.7,14%11%11%9%12%14%15%10%13%16%13%10%11%,-45%-5%-13%-18%-50%-45%-65%-30%-38%-65%-39%-53%-43%,-36%10%5%-6%-45%-25%-59%-25%-14%-62%-35%-38%-35%,9%15%18%12%5%20%6%5%24%3%4%15%8%,10.423.920.83.72.911.85.41
20、6.413.53.15.45.01.40,13.830.628.04.73.618.47.319.421.23.96.47.11.8,33%28%35%27%23%56%34%18%57%25%19%43%26%,29.628.124.523.728.537.528.035.935.58.87.26.67.9,8.113.116.910.311.410.57.114.110.210.910.910.314.0,11.024.222.83.92.813.95.914.416.03.76.27.01.63,Simple average,12%,11%,33%,11.4,*Potential ret
21、urn equals the percentage difference between the current share price and the target price,plus the forecast dividend yieldSource:HSBC estimatesChanges in core EPS(RMB),2012-14e_ 2012e _ _ 2013e _ _ 2014e _Old New%Chg Old New%Chg Old New%Chg,AgileCOLI*CRL*CGFranshion*GZ R&FKWGLongforShimaoShui On Lan
22、dSino OceanSohoYanlord,1.391.981.400.350.281.460.761.031.520.290.300.750.54,1.311.981.390.360.241.460.731.021.370.170.320.650.52,-6%0%0%2%-16%0%-5%-2%-10%-41%3%-13%-4%,1.472.351.660.400.321.540.891.201.850.320.370.620.63,1.352.441.680.410.311.600.821.171.700.290.410.710.66,-8%4%2%3%-3%4%-7%-3%-8%-9%
23、9%15%4%,1.632.901.990.450.381.741.021.392.120.360.470.530.72,1.543.042.140.460.421.850.951.361.950.420.500.550.72,-6%5%8%2%10%7%-6%-2%-8%17%5%3%0%,Simple average,-7%,0%,3%,*HKDSource:HSBC estimates,5,Financial Institutions Group30 January 2013Valuation summary:China Developers(share price as of 25 J
24、anuary 2013),abc,Company,Bbg,HSBC,Share Price Target Price,Diff to TP,Mkt Cap,12m NAV,(Disc)/Prem,_ Core PE(x)_,Yield(%),PB(x),Ticker,Rating,(HKD),(HKD),(%),(HKDbn),(HKD/sh),(%),FY12e,FY13e,FY12e,FY12e,China Props,AgileCOLICR LandCountry GardenFranshion PropertiesGuangzhou R&FKWG PropertyLongfor Pro
25、pertiesShimao PropertyShui On LandSino Ocean LandSOHO ChinaYanlord(SGD),3383 HK688 HK1109 HK2007 HK817 HK2777 HK1813 HK960 HK813 HK272 HK3377 HK410 HKYLLG SP,OW(V)OWOWOW(V)OWOW(V)OW(V)OWOW(V)NN(V)NN,11.024.222.83.92.813.95.914.416.03.76.27.01.6,13.830.628.04.73.618.47.319.421.23.96.47.11.8,262623202
26、8332435336327,381981257026451776561936363,21.627.826.75.06.524.517.725.824.610.29.911.52.7,(49)(13)(15)(22)(57)(43)(67)(44)(35)(64)(37)(39)(40),7.112.216.49.312.08.04.012.09.918.516.79.016.0,6.49.913.58.29.07.46.110.48.010.813.08.312.5,3.51.81.54.01.55.35.01.72.71.92.63.40.6,1.32.41.91.70.91.51.02.2
27、1.40.50.81.51.0,*For Champion REIT,Link REIT V=volatile.Source:Bloomberg,HSBC estimatesContracted sales analysis,Company,Dec-12Sales value,Change inSales value,Change inSales value,2012Sales value,Change insales value,Dec-12vs.2012 1Q,Dec-12vs.2011 2H,Dec-12vs.2012 YTD,2012 TargetSales value,2012 Ta
28、rgetSales,YTDas of,RMB m,m-o-m,y-o-y,RMB m,y-o-y Monthly average Monthly average,Monthly average,RMB m,%achieved,Agile*COLI*CR Land*Country Garden*EvergrandeGZ R&F*KWG*Longfor*Shimao*Sino Ocean*Vanke,6,0104,6886,1805,5107,6903,0011,0174,2703,8101,84014,070,87%8%49%-10%-35%9%-12%9%25%-16%-19%,72%2%6%
29、45%501%-1%85%63%70%-41%142%,33,07092,89952,19047,60092,32032,19812,20140,13046,09731,006141,400,5%28%45%10%15%10%7%5%50%15%16%,183%-35%126%170%179%36%50%96%56%69%36%,128%-3%65%52%21%13%24%28%39%-25%49%,118%-39%42%39%0%12%0%28%-1%-29%19%,31,50083,30040,00043,00080,00032,00012,00039,00040,00027,000120
30、,000,105%112%130%111%115%101%102%103%115%115%118%,DecDecDecDecDecDecDecDecDecDecDec,Average,7%,75%,18%,86%,31%,13%,112%,*Company under coverageSource:Company data,HSBC estimates,Financial Institutions Group30 January 2013Still another leg up Further rerating expected in 2013,as stable policy environ
31、ment,accommodating offshore debt marketand expectation of contracted sales growth create an environment of lower risk For most stocks,we expect valuation to revert back to mean,while selective outperformers trade at apremium.Our key picks are COLI,Longfor and Shimao We believe it is imperative that
32、developers strike a prudent balance between land acquisition and cashflow management in 2013,abc,Still positiveIn our view,growth expectation and a stablemacro and policy backdrop will fuel a further re-rating in sector valuations in 2013 to levelssimilar to 2010.While share prices in our universeof
33、 China property stocks have gone up by 82%since January 2012(significantly outperformingMSCI China,which was up 24%in the sameperiod),we expect more upside as investors lookpast the negatives of the past two years.Our viewis backed by strong evidence of a broad physicalmarket recovery,which became m
34、ore apparent in2H12.We believe market sentiment will continueto be underpinned by expectations of decentcontracted sales growth in 2013e,a revival indevelopers investment appetite and a stabilizingpolicy environment.The upcoming March,earnings season will be important in validatingthese expectations
35、.Over the course of 2013,we expect to see a modestreturn of pricing power,particularly in first-tiercities and provincial capitals.We are raising thetarget prices for our coverage to reflect an ASPincrease of 10%for residential and commercialassets in first-and second-tier cities in 2013,andnarrower
36、 target discounts to NAVs.Based on ournew target prices,we project market cap weightedupside potential of 22%for our coverage universe.Rating changes:We upgrade CRL to Overweight(remove the volatility flag)from Neutral(V),Shimao to Overweight(V)from Neutral(V)butdowngrade Sino Ocean to Neutral(V)fro
37、mOverweight(V).The ratings of other stocks areunchanged.Among the 13 China stocks under our,coverage,nine are rated Overweight and fourNeutral.Building in more constructivepricing assumptionsFollowing a 9%decrease in ASP in 2012,developers have started to raise prices modestly,while maintaining a he
38、althy contracted sales runrate.We expect first-and second-tier residentialand commercial prices nationwide to grow by 10%y-o-y in 2013,but maintain our assumption thatASP in third-tier cities will be flat.Our pricegrowth forecast largely tracks our Chinaeconomists forecast that GDP will grow 8.6%in2
39、013 in real terms.This is consistent with thecentral governments intent to maintain home pricegrowth in line with local GDP growth trends.Inour view,ASP growth level is constrained at these,6,2010,N/A,10,10,7,4,5,2011,13,15,11,19,17,31,2012,11,10,10,22,8,8,29,14,25,18,20,12,15,19,10,8,4,9,5,11,19,15
40、,10,9,9,Financial Institutions Group30 January 2013,abc,levels as more exuberant price movements are,economically affluent regions;hence our belief,ASP growth vs nominal GDP growth,likely to be met with more stringentimplementation of existing policies and potentialrisk of introduction of more regul
41、atory constraints.Residential price trend,that ASP will at best be flat in 2013.Property price assumption for coming 12 monthsResidential price Previous New assumptionassumption,BeijingShanghaiJiangsuZhejiang,2012 ASPgrowth7%3%6%10%,2012 GDPgrowth10%5%10%7%,2013 GDPgrowth target8%10%10%8%,7,0006,000
42、5,0004,000,(RMB/sqm),Tier-1 cityTier-2 cityTier-3 cityRetail/officeSource:HSBC estimates,FlatFlatFlatFlat,10%10%Flat10%,GuangdongHainanJilinHeilongjiangAnhuiJiangxiHenan,0%-13%-8%1%3%16%13%,10%11%13%7%12%11%9%,8%10%12%11%10%10%10%,3,0002,0001,00001998 2000 2002 2004 2006 2008 2010 2012Source:CEIC,Av
43、erage inventory-month at year end2008 2009Beijing 18 7Shanghai*13 3Tianjin N/A N/AChongqing#12 5Shenzhen 12 9Guangzhou N/A 6,Hubei 13%13%10%Yunnan 14%16%12%Shanxi 2%16%10%Ningxia 7%11%12%Average 10%Source:CEIC,Soufun,local government websites,HSBC estimateRemarks:1)2012 implied ASP is based on the r
44、esidential sales value and sales volume byprovince2)2012 GDP growth is based on the nominal change in absolute GDP value by province,The return of pricing power and a noticeabledecline in inventory levels in major cities in 2012,in our view,indicates that homebuyers haveadapted to the home purchase
45、restrictions(HPR)environment and stopped waiting after,Hangzhou*NanjinWuhanChengduDalianXiamenChangshaQingdao,N/A1537N/AN/AN/AN/A17,N/A212N/AN/A7N/A5,N/A613610,What triggered the initialrerating?In 1H12,the sectors rebound was led by small-and mid-cap beta plays trading at distressed,developers sens
46、ible downward adjustment inASPs.In our view,first-and second-tier citiesshould be the prime beneficiary of continuedeconomic growth and wealth creation,along withbetter demand and supply dynamics.We note that first-and second-tier cities on theeast coast saw the greatest improvement,reversing the bu
47、lk of the stock piling in 2011.Onthe other hand,the improvement in lower-tiercities is still lagging the scale of the more,Source:CREIS,HSBC estimate*Data from commodity residential properties(excluding public housing)#Data from commodity housing1.Based on commodity residential properties(unless sta
48、ted otherwise)2.Based on the inventory as of end-December divided by the average monthly transactionvolume of 4Q2.,valuation amid the reserve requirement ratio(RRR)cuts and expectations of further policyrelaxation,while the 2H12 rally reflectedimprovement in market fundamentals on the backof strong
49、contracted sales performance,which ledto optimism over a resumption of growth in 2013.Moreover,a stable policy environment amid asmooth leadership transition in November lastyear,and the governments subsequent emphasison the quality and efficiency of economic growth,along with urbanization being an
50、important driver,7,498,185,221,285,338,544,691,559,853,931,Financial Institutions Group30 January 2013of domestic spending,have further helped,Net gearing 1H09 to 1H12(as reported),abc,improve market sentiment.Last but not least,an,1H09,FY09,1H10,FY10,1H11,FY11,1H12,accommodating offshore debt marke
