Revenue and net profit grew by 23.7% to RMB33.5bn and 1.0% to RMB5.12bn in 1H20, respectively. The reporting profit was 5.1% below our estimate. Till Jul, Agile accomplished 55% of sales target. We raise TP to HK$13.89. Maintain BUY.
- Mild profit growth in 1H20. Revenue and net profit grew by 23.7% to RMB33.5bn and 1.0% to RMB5.12bn in 1H20, respectively. The reporting profit was 5.1% below our estimate of RMB5.40bn. Besides 18.7% growth in revenue from property sales, revenue from property management business gained 1.1x to RMB3.18bn in 1H20. Gross margin expanded by 4.0ppts to 34.4% but less other income dragged down EBIT margin by 4.0ppts to 36.5% in the period. Core net profit grew by 32.9% to RMB5.31bn in 1H20. Interim dividend was cut from HK$0.6 in 1H19 to HK$0.5 in 1H20.
- Products target to end-users and upgraders. Agile achieved RMB55.1bn contracted sales in 1H20. Contracted sales achieved to RMB10.6bn in Jul 2020 and hit rate reached 55% based on RMB120bn sales target. RMB165bn of properties will be launched in 2H20. About 89% properties launched in 2020 are targeted for end-users and upgraders or aggregate 43% of them are located in Eastern China or GBA.
- 41.95mn sq m attributable land bank. Agile acquired 20 property projects with total attributable GFA of 3.47mn sq m in 1H20. As at Jun 2020, total attributable land bank amounted to 41.95mn sq m with average land cost of RMB3,373/sq m. As at Jun 2020, Agile has secured 7mn sq m urban redevelopment projects with RMB240bn saleable resources.
- Diversified businesses is a trump card. After spinned off A-Living (3319 HK, BUY) in Feb 2018, Agile seeks listing of A-City Group on HKEx in 2020. In fact, diversified businesses become more important to Agile. Value of A-Living accounted for 28% of our estimated NAV or revenue from diversified businesses aggregately contributed 12.6% of total revenue in 1H20, compared with 9.0% in 1H19. More spin-offs will reflect true value of Agile.
- Raise TP. We maintain our profit forecast unchanged. As of Jun 2020, pre-sold and unbooked properties totaled RMB95.8bn, of which RMB45.8bn are consolidated. Furthermore, we slightly raise our end-20 NAV forecast from HK$27.41 to HK$27.78. We raise TP from HK$13.71 to HK$13.89, based on 50% discount to NAV.
