COGO changed presentation currency to RMB in the current year. Revenue and net profit grew by 33% to RMB28.6bn and 63% to RMB3.33bn in 2019, respectively. About RMB89bn of property sales had been locked up. We forecast net profit to be RMB4.21bn, RMB4.75bn and RMB5.51bn in 2020-22, respectively. We trim TP from HK$7.72 to HK$7.21. Maintain BUY.
- Core profit surged 60% in 2019. Since COGO announced a positive profit alert in Jan 2020, it is not surprised that net profit grew by 63% to RMB3.33bn in 2019. Driven by the increase of completed GFA to 3.26mn sq m, revenue gained by 32.8% to RMB28.6bn in 2019. On the other hand, gross margin and net margin expanded by 4.2ppts to 33.3% and 2.2ppts to 11.6% in 2019, respectively, due to the higher ASP. Final dividend increased from HK$0.112 in 2018 to HK$0.195 in 2019 that resulted in full year payout ratio improvement from 18.9% in 2018 to 21.9% in 2019.
- Estimated RMB88.6bn revenue had been locked-up. In 2019, contracted sales amount and area surged by 30.8% to RMB53.7bn and 26% to 5.04mn sq m, respectively. Although contracted sales amounted to RMB4.0bn in 2M20, COGO aims to have RMB60bn sales target in 2020. 8.32mn sq m of properties had been presold and unbooked. With contracted sales ASP of RMB10,652 per sq m in 2019, we estimate RMB88.6bn of revenue from property sales had been locked up which provides more than one year earnings visibility.
- Land bank sufficient to 5 year development. In 2019, COGO acquired 31 plots of land with total GFA of 6.19mn sq m. Entering new markets in Quanzhou, Weinan and Qingyuan, COGO invested in projects spanning 26 mainland cities as at end-19 and plans to expand 2-3 new cities each year. As at end-19, total and attributable land bank amounted to 24.01mn sq m and 21.94mn sq m, respectively.
- Cut TP to HK$7.21. We forecast net profit to be RMB4.21bn, RMB4.75bn and RMB5.51bn in 2020-22, respectively. COGO has the healthy balance sheet with net gearing ratio of 15.6% as at end-19. We trim our end-20 NAV forecast from HK$11.03 to HK$10.3. As a result, we adjust downward TP from HK$7.72 to HK$7.21, which is equivalent to 30% discount to NAV. Upside potential is 76.8% Reiterate BUY.
