Revenue and core net profit increased by 30.4% to RMB151bn and 12.9% to RMB18.3bn in 2019, respectively. We cut our earnings forecast by 2.1% in 2019 to reflect outbreak situation. We estimate end-20 NAV to be HK$48.95. As a result, we raise TP from HK$26.06 to HK$34.27. Maintain HOLD.
- Results in line. Revenue and net profit gained by 30.4% to RMB151bn and 12.9% to RMB18.3bn in 2019, respectively. Excluding investment properties (IP) revaluation gain, core earnings advanced by 21.0% to RMB15.6bn in 2019, which was 4.1% below our forecast of RMB16.2bn. Longfor declared to pay final dividend of RMB0.84 per share that resulted in full year dividend of RMB1.2 per share or pay out of 45% based on core earnings.
- RMB260bn contracted sales in 2020. In 2019, contracted sales amount and area gained by 20.9% to RMB242.5bn and 15.2% to 14.24mn sq m, respectively. Given about RMB410bn saleable resources launched, Longfor aims at RMB260bn sales target in 2020. Having about 82% of the saleable resources located in the first and second tier cities, Longfor is confident to have more than 60% sell through rate in this difficult moment.
- Rental income aims a 30% CAGR next three years. Longfor provides rental concession for its mall tenant during outbreak period. Tenants only pay half of rent in 25/1-31/3. The Company estimates about RMB500mn rental income is lost but it is glad to support these tenants. In 2019, 10 shopping malls were opened with more than 90% occupancy rate. So we forecast rental income (malls + apartments) to grow by 25.8% to RMB7.3bn in 2020. Looking forwards, Longfor plans to add 10 malls each year and rooms of leasing apartment can reach 100,000 by end-20.
- Attributable land bank of 47.42mn sq m. In 2019, the Company acquired 90 new projects with total attributable GFA of 12.73mn sq m. Attributable consideration was RMB78.7bn. As at end-10, attributable land bank amounted to 47.42mn sq m and covered 56 cities. Average land cost was RMB5,737 per sq m and estimated total sales value amounted to RMB930bn.
- Maintain HOLD. We believe Longfor is one of the best in terms of financial position. As at end-19, net gearing ratio and cash/short term debt were 51.0% and 4.4x, respectively. We cut our earnings forecast by 2.1% in 2019 to reflect outbreak situation. We forecast end-20 NAV to be HK$48.95. As a result, we raise TP to HK$34.27, based on 30% discount to NAV.
