Revenue and core profit increased by 26.6% to RMB13.5bn and 31.4% to RMB3.3bn in 1H20, respectively. We raise TP from HK$13.70 to HK$17.87, based on 30% discount to NAV. Maintain BUY.
- Core profit surged 31% in 1H20. Although recognized ASP tumbled 17% to RMB12,428 per sq m due to change in city mix, delivery GFA jumped 55% to 1.03mn sq m in 1H20. Total revenue and core profit soared by 26.6% to RMB13.5bn and 31.4% to RMB3.3bn in 1H20, respectively. Gross margin narrowed by 2.1ppts to 32.9% in 1H20 but stayed above industry level. SG&A/revenue ratio declined 3.0ppts to 9.2% in 1H20 due to better cost control. KWG declare RMB0.4 interim dividend.
- 45% hit rate by Jul. Contracted sales amount gained 2% to RMB36.8bn in 1H20. In Jul, it further captured RMB9.23bn contracted sales. So KWG accomplished 45% hit rate based on RMB103.3bn sales target by Jul. The Company will launch RMB130bn properties in 2H20, of which 45% in GFA and 30% in YRD, in order to complete full year sales target. As at Jun 2020, presold and unbooked properties amounted to RMB65bn.
- 16.36mn sq m attributable land bank. KWG acquired 10 new projects of total GFA of 1.11mn sq m (attributable 80%) in 1H20. As at Jun 2020, the Company had invested in 165 property projects in 40 cities with total GFA of 24.75mn sq m (attributable 66%). Total saleable resources amounted to RMB510bn, of which 50% are in GBA. Furthermore, KWG had signed 32 urban redevelopment projects with saleable GFA of 18.45mn sq m and leasable GFA of 2.6mn sq m.
- Recurring income reached RMB1.0bn in 1H20. Eight shopping malls (0.7mn sq m GFA) and eight offices are in operation while 16 shopping malls (1.1mn sq m) and six offices are under-construction. Rental income gained 9.9% to RMB362mn in 1H20. Meanwhile, revenue of property management increased 751 to RMB0.55bn in the period. KWG is applying spin-off listing of KWG Living on HKEx. As at Dec 2019, KWG Living managed 18.3mn sq m residential and 3.3mn sq m commercial.
- Reiterate BUY. Net gearing stayed at healthy level of 59.2% as at Jun 2020. We raise our core earnings forecast by 6.9% to RMB6.66bn in 2020 and 8.4% to RMB7.97bn in 2020. We also raise end-20 NAV forecast from HK$22.84 to HK$25.52. As a result, we raise TP from HK$13.70 to HK$17.87, based on 30% discount to NAV.
