Revenue and core earnings increased by 146% to RMB9.62bn and 30.7% to RMB657mn in 1H20. According to CRIC, Redsun was ranked 46th largest developer based on contracted sales amount in 1H20. It plans to open another 11 Hong Yang Plazas (HYP) in coming years. Net gearing ratio was 69% as at Jun 2020. Balance sheet was healthy. We raise TP from HK$3.22 to HK$3.52. Maintain BUY.
- Core profit surged 31% in 1H20. Revenue surged 146% to RMB9.62bn because delivery GFA increased to 0.86mn sq m in 1H20. GM was reduced by 3.7ppts to 25.3% in 1H20. Interest expenses also increased 131% to RMB425mn in the period due to increase borrowings. Lastly, more reduction from minority interests due to co-operation with other developers dragged down core profit to RMB657mn in 1H20, up 30.7% YoY.
- Contracted sales increased 4% in 1H20. Contracted sales amount gained by 4.4% to RMB31.57bn but area dropped 8.5% to 2.15mn sq m in 1H20. According to CRIC, Redsun was ranked 46th largest developer based on contracted sales amount in 1H20. RMB87.8bn of properties will be launched in 2H20, of which 55% are located at Jiangsu area. With 50% sell through rate in 2H20, Redsun would achieve its full year target of RMB75bn.
- Open 11 HYP in the future. Revenue from property investment & operation increased 14% to RMB213mn in 1H20. Three HYP in Nanjing, Changzhou and Yantai are operating, of which Yantai HYP is asset-light model. Through asset-light model, Redsun can expand rapidly its shopping mall business. It plans to open another 11 HYP in the future.
- Total land bank of 18.37mn sq m. Redsun acquired 21 plots of land with total GFA of 3.07mn sq m in 1H20. Total and attributable land bank amounted to 18.37mn sq m and 9.67mn sq m as at Jun 2020, respectively. 169 property projects ae located in 43 cities. Land bank in Jiangsu, YRD ex-Jiangsu and others accounted for 55%, 18% and 27% respectively.
- Raise TP to HK$3.52. Net gearing ratio improved to 68.7% and cash/short debt ratio was 1.5x as at Jun 2020. Balance sheet was at healthy level. Pre-sold and unbooked properties totaled RMB27.5bn as at Jun 2020. We forecast net profit to be RMB1.6bn, RMB2.1bn and RMB2.4bn in 2020-22, respectively. We raise end-20 NAV forecast from HK$5.36 to HK$5.87. As a result, we adjust TP from HK$3.22 to HK$3.52, representing a 30% discount to NAV. Reiterate BUY.
