Aoyuan participated in our Property Day last week. The Company achieved RMB88.6bn contracted sales in 10M19, up 31% YoY, completing 78% of RMB114.1bn sales target. Given RMB645bn saleable resources, the Company aims to climb the league table and become a Top 20 developer in 2020. We maintain TP of HK$14.3 and forecast unchanged. Reiterate BUY.
- 31% contracted sales growth in 10M19. Aoyuan announced contracted sales grew by 55% YoY to RMB10bn in Oct 2019. From Jan to Oct 2019, accumulated contracted sales amounted to RMB88.6bn, up 31%. The Company accomplished about 78% of full year sales target of RMB114.1bn. According to CEIC, Aoyuan was ranked the 27th developer based on the gross sales in 10M19. Although it did not disclose its 2020 sales plan, it hinted that it hopes to climb to Top 20 in 2020.
- Urban redevelopment projects can bring RMB220bn saleable resources. Aoyuan is a major urban redevelopment player. It participates in about 30 urban redevelopment projects with total GFA of 16.04mn sq m. It is estimated that these 30 projects would bring about RMB219.7bn saleable resources. The Company has successfully taken over redevelopment of Zhuhai Cuiwei Village recently that provides about 0.57mn sq m of saleable GFA with RMB20bn saleable resources. Combined with the existing land bank, total saleable resources for Aoyuan amounted to RMB645.2bn which will provide war chest for its future development.
- Waiting for approval regarding 13.86% acquisition of Aeon Life Insurance. In Jul 2019, Aoyuan announced the acquisition plan of 13.86% of Aeon Life Insurance. The Company already paid the consideration of RMB3.26bn and now is waiting for the authority approval which will be revealed in coming Jan. Aeon Life Insurance has expanded into 20 provinces and cities and recorded profit of RMB697mn in 2018. It not only has a stable income stream, but also complements the business development of Aoyuan Healthy Life (3662 HK, NR) which was spun off in Mar 2019.
- Maintain TP & forecast unchanged. Reiterate BUY. We maintain our TP and forecast unchanged. As at Jun 2019, pre-sold and unbooked properties amounted to RMB139bn that has high earnings visibility in coming two years. Having 7.56mn sq m GFA or RMB110bn sales resources in Greater Bay Area, Aoyuan will benefit from the robust development in the area.
