The reported net profit was 14.7% and 10.7% below our and market consensus forecast due to less than expected delivery and gross margin assumption. We cut our earnings forecast by 15.6% in 2020 and 16.8% in 2021. Furthermore, we trim TP from HK$16.49 to HK$10.65. Maintain BUY.
- 2019 earnings rose by 5%. Revenue and net profit just advanced by 7.3% to RMB60.2bn and 5.4% to RMB7.5bn in 2019, respectively. The reported net profit was 14.7% and 10.7% below our and market consensus forecast. Gross margin declined from 43.9% in 2018 to 30.5% in 2019. Furthermore, SG&A expenses/revenue ratio increased from 9.8% in 2018 to 10.4% in 2019 because of business expansion. The Company declared final dividend of HK$0.4 per share that resulted in full year dividend of HK$1.0 per share.
- RMB120bn contracted sales target in 2020. In 2020, about RMB220bn of properties will be launched for sales, of which 35 are new projects and 178 are existing ones. In addition, more than 13mn sq m of properties are for end-users & upgraders. Full year contracted sales target will be RMB120bn in 2020. As at end19, pre-sold and unbooked properties amounted to RMB37bn, of which RMB8bn came from Hainan project.
- Attributable land bank of 39.70mn sq m in 75 cities. Agile acquired 42 plots of land with total GFA of 10.90mn sq m in total consideration of RMB47.2bn in 2019. The Company newly entered nine mainland cities and Phnon Penh of Cambodia. As at end-19, Agile owned 39.70mn sq m attributable land bank in 75 cities and average land cost amounted to RMB3,364 per sq m.
- Diversified businesses are growth engines. Revenue from diversified businesses (Hotel, rental, A-Living and environmental) grew from RMB2.35bn in 2017 to RMB6.06bn in 2019, representing a CAGR of 61%. The Company plans to spin off its construction business to list on HKEx this year.
- Cut forecast and TP. We cut our GM assumption and delivery plan. We trim earnings forecast by 15.6% to RMB7.44bn in 2020 and 16.8% to RMB8.74bn in 2021. We cut end-20 NAV forecast from HK$32.58 to HK$26.62 due to less GM assumption and higher borrowing. As a result, we cut TP from HK$16.49 to HK$10.65, based on 60% discount to NAV.
