Revenue and core earnings surged by 24.6% to RMB8.7bn and 71.5% to RMB680mn in 1H20, respectively. Contracted sales gained by 1.6% to RMB43.5bn in 1H20. Sinic acquired 22 new projects of attributable GFA 1.66mn sq m in 1H20. As at Jun 2020, total attributable land bank was 15.34mn sq m. We cut our core earnings forecast around 10%. We raise our TP from HK$5.02 to HK$5.06, representing a 50% discount to NAV. Maintain BUY.
- Core earnings soared 72% in 1H20. Revenue and core earnings surged by 24.6% to RMB8.7bn and 71.5% to RMB680mn in 1H20, respectively. Delivery GFA and recognized ASP increased 11.0% to 0.73mn sq m and 9.5% to RMB11,588 per sq m in 1H20, respectively. GM declined by 2.9ppts to 30.2% in 1H20. The Company implemented better cost control as SG&A expenses to revenue ratio dropped from 8.9% in 1H19 to 7.1% in 1H20. Lastly, 11.3ppts decline of effective tax rate also drove earnings growth.
- Contracted ASP upped 10% in 1H20. Attributable contracted sales amount gained by 6.8% to RMB21.1bn in 1H20. Jiangxi Province was the largest contribution among four regions and accounted for 41% of total attributable contracted sales. Contracted ASP was RMB14,264 per sq m in 1H20, up 9.7%.
- Make more effort on business development in YRD and GBA. In 1H20, the Company acquired 22 new properties project with total GFA of 2.29mn sq m (Attri: 1.66mn sq m). Their average land cost was RMB5,601 per sq m. As at Jun 2020, total attributable land bank amounted to 15.34mn sq m, of which land bank in Jiangxi and GBA accounted for 32.2% and 31.0%, respectively. Looking forward, the Company will make more effort on the new projects acquisitions in YRD and GBA. It hopes land bank would be evenly distributed among the four regions.
- Improving financial position. Net gearing ratio came down from 238% as at Dec 2018 to 67.0% as at Dec 2019, and further to 66.2% as at Jun 2020. Cash on hand and total borrowing amounted to RMB17.7bn and RMB28.4bn as at Jun 2020. Cash/short term debt ratio stood at 1.4x as at Jun 2020. Sinic is financial healthy for business expansion.
Maintain BUY. Due to the impact from COVID-19, we trim net profit forecast by 5.3% to RMB2.72bn in 2020, 10.2% to RMB3.3bn in 2021 and 9.7% to RMB3.84bn in 2020. We raise our end-20 NAV forecast from HK$10.04 to HK$10.11. Accordingly, we raise our TP from HK$5.02 to HK$5.06, representing a 50% discount to NAV. Maintain BUY.
