Revenue and net profit surged 30.4% to RMB111.5bn and 23.3% to RMB10.9bn in 2019, respectively. Core profit in 2019 was 2.6% below our estimate. In 2020, Shimao sets full year sales target as RMB300bn. It plans to spin off property management (PM) and hotel businesses in coming two years. We forecast core profit to be RMB12.7bn, RMB15.5bn and RMB18.2bn in 2020-22, respectively. TP is revised upward to HK$32.21, equivalent to 30% discount to NAV. Maintain BUY.
- Core profit inline. Revenue and net profit jumped 30.4% to RMB111.5bn and 23.3% to RMB10.9bn in 2019, respectively. 20% increase in delivery GFA and 9% increase in recognized ASP drove the top-line growth. Gross margin slightly declined by 0.9ppts to 30.6% in 2019. Core profit grew by 22.5% to RMB10.5bn in 2019, 2.6% below our forecast. Full year dividend upped 21% to HK$1.45, equivalent to 41% of payout ratio.
- RMB300bn sales target in 2020. Shimao acquired many property projects in 2019. The Company will launch about RMB500bn saleable resources in 2020, of which 20% in first tier cities and 49% in second tier ones. Assuming 60% sales through rate, Shimao expects to achieve RMB300bn sales target in 2020. As at end-19, about RMB140bn of properties were pre-sold and unbooked that would provide one year earnings visibility.
- 65% of new land bank acquired by M&A. Shimao acquired land bank aggressively in 2019. It acquired 115 plots of land with total GFA of 30.92mn sq m, of which 65% of new land were acquired through M&A. As at end-19, total attributable land bank amounted to 47.19mn sq m, which spread across 349 projects in 120 cities. Shimao estimates total value of land bank amounts to RMB1,300bn. Furthermore, another RMB400bn of land bank may be converted by urban redevelopment projects in the future.
- Raise TP to HK$32.21. Shimao plans to spin off PM and hotel businesses in coming two years. Contracted GFA of PM business was 100mn sq m as at end-19. Shimao expects to double it in 2020. Therefore, we estimate revenue from PM will rise 86% to RMB4.6bn in 2020. We forecast core profit to grow by a CAGR of 20.2% to RMB12.7bn, RMB15.5bn and RMB18.2bn in 2020-22, respectively. Furthermore, we raise our end-20 NAV forecast from HK$45.06 to HK$46.02. TP is revised upward to HK$32.21. Recommendation is maintained as BUY.
