Revenue and core profit increased by 20.2% to RMB21.4bn and 20.4% to RMB2.65bn in 2019, respectively. The reported core profit was 20% below our estimate. We estimate end-20 NAV to be HK$9.58. As a result, we raise TP from HK$4.83 to HK$5.74. Maintain BUY.
- Missed our estimate. Revenue and net profit increased by 20.2% to RMB21.4bn and 3.7% to RMB3.51bn in 2019, respectively. Core earnings grew by 20.5% to RMB2.65bn in the period, which was 20.4% below our forecast but in line with market. Major discrepancies came from lower than our expected GM (27.6% actual vs 30.4% our estimate) and slower revenue growth. Full year dividend was HK$0.24/share, equivalent to 33% payout.
- RMB93bn contracted sales target in 2020. Due to the outbreak, contracted sales amount tumbled 23% to RMB6.9bn in 2M20. Therefore, the Company tuned down its sales plan after a 57% growth of contracted sales in 2019. It targets a RMB93bn contracted sales in 2020, based on RMB170bn saleable resources and 55% sell through rate. About 100 new projects will be launched in 2020 and about 69% of new projects come from the first and second tier cities. As at end-19, about RMB45bn (consolidation level) and RMB46bn (JCE level) of properties were pre-sold and unbooked.
- 32.09mn sq m total land bank in 47 cities. China SCE acquired 46 new projects in 36 cities (including 12 new cities) with total GFA of 9.8mn sq m (attributable ratio of 63%), for a total consideration of RMB47.7bn in 2019. As at end-19, China SCE had land bank in 47 cities with total GFA of 32.09mn sq m (attributable GFA 18.5mn sq m). Average land cost was RMB4,002/sq m, which is competitive compared with its contracted sales ASP of RMB12,728/sq m in 2019.
- “One Body Two Wings” business model. China SCE adopts the strategy of property development as the main body and shopping mall as well as long-term leasing apartment businesses as two wings. By 2025, China SCE hopes to have 100 shopping malls and 0.2mn rental apartments. Because of synergy, China SCE can obtain land banks with high quality and competitive cost.
- Maintain BUY. We cut our earnings forecast by 8.3% to RMB3.56bn in 2020 and 14.4% to RMB4.43bn in 2020 due to lower GM assumption. We raise end-20 NAV forecast from HK$8.05 to HK$9.58 to reflect the new land acquisitions. As a result, we raise TP from HK$4.83 to HK$5.74, based on 40% discount to NAV.
