COLI has changed the presentation currency from HK$ to RMB since 2019 results. Revenue and core earnings grew by 13.6% to RMB163.7bn and 10.3% to RMB34.3bn in 2019, respectively. We changed TP to HK$28.12. Upgrade to BUY.
- 2019 earnings growth as expected. Revenue and net profit gained 13.6% to RMB163.7bn and 10.3% to RMB41.6bn in 2019, respectively. Excluding the revaluation gain, core earnings increased by 10.1% to RMB34.3bn in the period, compared with our growth forecast of 10.6%. Gross margin declined by 4.1ppt to 33.7% but maintained as leading position. Full year dividend was HK$1.02, up 13% YoY, with payout ratio of 28.4%.
- Contracted sales increased 25% in 2019. Contracted sales amount and area gained by 25.2% to HK$377.2bn and 12.6% to 17.94mn sq m in 2019, respectively. COLI was ranked as the seventh largest developer in terms of contracted sales, according to CRIC data. It plans to have 24mn sq m of new start (up 11% YoY) that will result in RMB680bn saleable resources in 2020. Assume a 55% sale through rate, we forecast full year contracted sales to be RMB374bn in 2020. Furthermore, about RMB275.3bn (up 40% YoY) of properties were presold but unbooked that would provide more than one year of earning visibility.
- Total land bank of 89.23mn sq m. COLI acquired 53 plots of land in 25 cities with total GFA of 11.46mn sq m in 2019. Total consideration was RMB148.5bn. COLI’s footprint newly entered Shijiazhuang and Guiyang. Total and attributable land bank amounted to 89.23mn sq m and 61.57mn sq m as at end-19, respectively.
- Aiming to have HK$10bn rental income by 2023. Rental income soared by 26.3% to RMB3.75bn in 2019. COLI had 72 commercial properties under operations with total GFA of 4.38mn sq m, of which offices and shopping malls accounted for 65% and 26%, respectively. Its offices and shopping malls’ occupancy rate reached 90.3% and 96.1% as at end-19, respectively.
- Upgrade to BUY. Net gearing and cash/short term debt were 32.7% and 3.0x as at end-19. Cost of debt stayed at 4.21% in 2019. Balance sheet is healthy. We forecast core profit to grow by 18.5% to RMB40.6bn in 2019 and 14.9% to RMB46.7bn in 2021. We estimate end-20 NAV to be HK$40.17 per share. As a result, we trim TP from HK$28.36 to HK$28.12, representing a 30% discount to NAV.
