CR Land announced to have HK$6.7bn top-up placement. It sold 200mn existing shares at HK$33.65 per share and will subscribe same amount of shares at same price. Total proceeds amounted to HK$6.7bn. The parent will reduce its holding from 61.27% to 59.55% after the subscription of new shares in Nov 2019. New shares represent 2.8% of enlarged capital. We raise TP from HK$34.81 to HK$36.02 due to new land acquisitions in 3Q19 and new proceeds. Maintain HOLD recommendation.
- Raised HK$6.72bn. The Company announced to sell 200mn existing shares at HK$33.65 per share and will subscribe same amount of shares at same price. The placing price is equivalent to 6.9% discount to previous closing price of HK$36.15. Total proceeds amounted to HK$6.72bn, of which 90% is used for land acquisitions and remaining 10% is used for general working capital.
- Contracted sales increased 16% in 9M19. Contracted sales amount and area gained by 15.7% to RMB175.4bn and 11.0% to 9.56mn sq m in 9M19, respectively. CR Land achieved 73% hit rate by Sep based on RMB242bn sales target. Although sales growth in 9M19 was faster than national average of 7.1%, it was slower than that of mid-cap developers because of the size. East China Region, North China Region and South China Region contributed about 29.0%, 24.1% and 19.3% of contracted sales in 9M19, respectively. The even geographical distribution would reduce concentration risk.
- 29% rental income growth in 9M19. Following more shopping malls commenced operation, rental income from investment properties surged by 29.1% to RMB8.91bn in 9M19. In 2H19, six new shopping malls will open. It will drive rental income growth further in the future. We forecast rental income will grow at 18.0% to RMB11.2bn in 2019 and 20.0% to RMB13.5bn in 2020.
- RMB21.9bn capex on land acquisitions in 3Q19. CR Land acquired 20 plots of land with 4.33 mn sq m total GFA in 3Q19. Attributable land premium amounted to RMB21.86bn. In 9M19, CR Land replenished 14.53mn sq m of new land bank that can support the Company’s development next three years.
- Maintain HOLD. We forecast net gearing as at Dec 2019 to improve from 35.3% before placement to 31.1% after placement. We also trim our EPS forecast by 0.5% in 2019 and 2.8% in 2020 due to dilution. However, we raise end-20 NAV estimate from HK$49.73 to HK$51.45 due to new proceeds and new land. As a result, we raise TP from HK$34.81 to HK$36.02, representing a 30% discount to NAV.
