【Company Research】Sinic Holdings (2103 HK) – Rising developer in YRD and GBA

Core earnings largely beats our expectation. Revenue from property development increased by 220% to RMB26.8n in FY19, driving the total revenue up 221% to RMB27.0bn. Due to the product mix of recognized projects, overall gross margin decreased from 37.3% in FY18 to 29.6% in FY19. On the other hand, effective tax rate decreased from 67.8% in FY18 to 48.5% in FY19, and minorities deduction also decreased significantly from 25.5% to 2.8%. Thus, core earnings was up 485% to RMB1,853mn. Final dividend was RMB0.13 per share, representing 25% of core profit payout. Earnings is 27% above our forecast, given that the revenue from property development is 20% above our forecast and minority deduction is 85% less than our forecast.

20% growth target. In 2019, the Company achieved RMB91.4bn contracted sales, up 29% YoY. Attributable sales amounted to RMB45.1bn with 3.45mn sq m GFA sold, up 30% and 26% YoY, respectively. Among the RMB45.1bn attri. sales, 53%/24%/11% came from Jiangxi/GBA/YRD. Sales contribution from GBA and YRD has increased significantly during the past two years. Sinic sets FY20 attri sales target at 20% growth, which is equivalent to RMB54.1bn. Attri. saleable resources in FY20 amounted to RMB106.4bn, indicating target sell through at 51%.

More emphasize on YRD and GBA. By end-FY19, total attri. land bank amounted to 15.09mn sq m, of which 33.1%, 17.3% and 32.5%, are in Jiangxi, YRD and GBA. While Sinic is keeping its leading position in Jiangxi, YRD and GBA market are playing more important role in the Company’s development strategy. We expect over 50% of sales will come from these two regions. In fact, among the RMB106.4bn saleable resources, 24%, 22% and 28% are in Jiangxi, YRD and GBA.

Raise TP and maintain BUY rating. We raise FY20/21 earnings forecast by 4.9%/2.0% to RMB2,872/3,668mn. We derive our end-FY20 NAV forecast at HK$10.08 per share. Given 50% discount, we raise our TP from HK$4.83 to HK$5.02. Maintain BUY.