Revenue and net profit increased by 45.2% to RMB15.1bn and 20.4% to RMB2.11bn in 1H20, respectively. Property management business will be a highlight. We estimate end-20 NAV to be HK$9.34. As a result, we adjust TP from HK$5.74 to HK$5.60. Maintain BUY.
- Interim core profit advanced 19%. Revenue and core profit grew by 45.2% to RMB15.1bn and 19.2% to RMB1.84bn in 2H20, respectively. 46% growth of revenue from property development was driven by 109% surge in delivery GFA to 1.09mn sq m but partially offset by 30% retreat in recognized ASP. About 27% of revenue of property development came from Quanzhou which had ASP of RMB7,863 per sq m. GM came down 1.0ppts to 27.9% in the period. Furthermore, admin expenses surged 63.7% to RMB1.03bn due to business expansion. Interim dividend of HK$0.11 was declared.
- Contracted sales gained 8% in 1H20. Contracted sales amount advanced 8% to RMB40.1bn but area declined 8% to 2.73mn sq m in 1H20. Hit rate was 43% based on RMB93bn sales target. The Company will launch more projects in 2H20. Projects in Xiamen and Beijing account for 19% and 12% of total, respectively. In Jul 2020, China SCE achieved contracted sales of RMB7.7bn, up 49% YoY. As at Jun 2020, about RMB45bn (consolidation level) and RMB63bn (JCE) of properties were pre-sold and unbooked, of which RMB16bn (consolidation) and RMB29bn (JCE) will be booked in 2H20.
- Land bank acquisitions by “One Body Two Wings” model. China SCE acquired 10 new projects in eight cities with total GFA of 3.32mn sq m (attributable ratio of 79%). Eight of them were acquired through combination with shopping malls and leasing apartments. As at Jun 2020, China SCE had land bank in 54 cities with total GFA of 33.03mn sq m (attributable GFA 20.06mn sq m). Average land cost was RMB4,313/sq m, which is equivalent to 29% of contracted sales ASP of RMB14,680/sq m in 1H20.
- Property management business is a highlight. Revenue from property management grew by 46.4% to RMB233mn in 1H20. Contract GFA and managed GFA of residential are 20mn sq m and 10mn sq m, while those of commercial properties are 2.1mn sq m and 0.7mn sq m, respectively.
- Maintain BUY. We slightly adjust our earnings forecast. We trim end-20 NAV forecast from HK$9.58 to HK$9.34. As a result, we adjust TP from HK$5.74 to HK$5.60, based on 40% discount to NAV.
