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FIXED INCOME WEEKLY China Property Bonds: Who Are the Higher Quality Issuers?

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iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team FIXED INCOME WEEKLY China Property Bonds: Who are the Higher Quality Issuers? Differentiate Between Strong and Weak Developers The spike in yields across Chinese property developers is currently presenting attractive investment opportunities. To help investors differentiate between the stronger and weaker property developers, we highlight some of their financial ratios, giving us a gauge of who faces lower risks of default. High Liquidity The cash ratio measures the amount of cash or cash equivalents held by the company over its short- term liabilities. The higher the amount of liquid assets it holds, the greater the ability for the company to meet bond payments on time and avoid defaults. Healthy Liquidity The CFO-to-Debt ratio is a measure of how the liabilities are covered by the cash flow generated from a company’s operation. The higher the amount of operating cash flow generated from its core businesses, the lesser the reliance on the borrowing, and the greater the financial flexibility for the company to meet bond payments. Low Leverage With lower levels of net debt-to-equity ratio, tightened liquidity or access to credit should be less of a concern to these companies. Strong Solvency Interest coverage ratio is measured by operating income (or earnings before interest and tax) over interest expense. A stronger level of solvency means firms have greater ability to avoid bankruptcy and repay their debt obligations. Who are the Strong Property Developers? We calculate a composite score by combining the aforementioned ratios via a standardisation method to provide a quick measure of the developer’s overall credit quality relative to its peers. The z-score serves as a quick assessment on the relative credit risk and enables us to compare and rank developers within the industry iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team FIXED INCOME WEEKLY China Property Bonds: Who are the Higher Quality Issuers? Selloff in Property Developer Bonds Chinese property developer bonds plunged in the past week. Here are key reasons to explain the property developers’ selloff: 1. Default cases • Solar cell manufacturer Chaori Solar became the first company to default on its publicly offered bond in China’s onshore market on 7 Mar 2014, breaking China’s history of zero bond defaults since 1995. The message is clear that the government will no longer provide “implicit guarantee” on investment products. • Property developer Zhejiang Xingrun Real Estate collapsed on 18 Mar 2014 and may default on RMB3.5b worth of debt, held mainly by banks and also individual investors. The size of the default is not negligible and this is the largest property developer at risk of bankruptcy in recent years. 2. Property market risks heightens • Property sales fell 3.7% year-on-year in January and February, underscoring weak demand which will put pressure on developers • Home price growth decelerated in all three tiers cities decelerated in February, versus January. More bond defaults should not be ruled out but we do not see systemic risks on the horizon. The spike in yields across Chinese property developers is currently presenting attractive investment opportunities. To help investors differentiate between the stronger and weaker property developers, we highlight some of their financial ratios, giving us a gauge of who faces lower risks of default. (Please note that we do not offer bonds issued by all of the mentioned property developers. These bonds may be placed on our platform at a later date, nevertheless.) High Liquidity: Who has cash to meet its debt payments? Ranked by cash ratio, Table 1 shows the companies who have the highest liquidity. The cash ratio measures the amount of cash or cash equivalents held by the company over its short-term liabilities. The higher the amount of liquid assets it holds, the greater the ability for the company to meet bond payments on time and avoid defaults, which sometimes arise when issuer cannot get cash in time. Table 1: Property Developers Ranked by Cash Ratio (In FY 2013) Cash & Cash Rank Company Name Equivalents to Total Current Liabilities Top Five Developers 1 SHENZHEN INTL HOLDI-PARALLEL 深圳控股 1.00* 2 CHINA MERCHANTS LAND LTD 招商局置地 0.57 iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team 3 SOHO CHINA LTD SOHO 中國 0.53 4 CHINA SOUTH CITY HOLDINGS 華南城 0.42 5 CHINA OVERSEAS GRAND OCEANS 中海宏洋 0.41 Bottom Five Developers 1 KAISA GROUP HOLDINGS LTD 佳兆業 0.15 2 GREENLAND HONG KONG HOLDINGS 綠地香港 0.12* 3 HOPSON DEVELOPMENT HOLDINGS 合新創展 0.10* 4 SHANGHAI INDUSTRIAL URBAN DE 上實城市開發 0.10* 5 GLORIOUS PROPERTY HOLDINGS 恆盛地產 0.04* Source: Company Data, Bloomberg and iFAST Compilations *Data as at 1H 2013 Healthy Liquidity: Who has cash generated from its core business to meet its debt obligations? Ranked by operating cash flow to total liabilities ratio, Table 2 shows the companies who have the healthiest liquidity. The CFO-to-Debt ratio is a measure of how the liabilities are covered by the cash flow generated from a company’s operation. The higher the amount of operating cash flow generated from its core businesses, the lesser the reliance on the borrowing, and the greater the financial flexibility for the company to meet bond payments. Table 2: Property Developers Ranked by CFO-to-Debt Ratio (In FY 2013) Operating Cash Rank Company Name Flow to Total Liabilities Top Five Developers 1 CHINA SOUTH CITY HOLDINGS 華南城 6.94 2 SHENZHEN INTL HOLDI-PARALLEL 深圳控股 5.61* 3 LONGFOR PROPERTIES 龍湖地產 5.12* 4 CHINA RESOURCES LAND LTD 華潤置地 5.07* 5 C C LAND HOLDINGS LTD 中渝置地 2.97* Bottom Five Developers 1 CHINA SCE PROPERTY HOLDINGS 中駿置業 -7.01* 2 AGILE PROPERTY HOLDINGS LTD 雅居樂 -7.72* 3 FRANSHION PROPERTIES 方興地產 -9.43* 4 CHINA OVERSEAS GRAND OCEANS 中海宏洋 -19.25 5 GEMDALE PROPERTIES AND INVES 金地商置 -65.04 Source: Company Data, Bloomberg and iFAST Compilations *Data as at 1H 2013 iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team Low Leverage: Who is least dependent on debt? Ranked by net debt-to-equity ratio, Table 3 shows the companies who have relatively low leverage versus their peers. With lower levels of debt, tightened liquidity or access to credit should be less of a concern to these companies. Table 3: Property Developers Ranked by Low Net Gearing Ratio (In FY 2013) Net Debt to Rank Company Name Shareholder Equity Top Five Developers 1 CHINA MERCHANTS LAND LTD 招商局置地 3.71 2 SOHO CHINA LTD SOHO 中國 18.04 3 CHINA OVERSEAS LAND & INVEST 中國海外 28.70 4 C C LAND HOLDINGS LTD 中渝置地 31.57 5 CHINA SOUTH CITY HOLDINGS 華南城 36.93 Bottom Five Developers 1 POLY PROPERTY GROUP CO LTD 保利地產 86.71 2 CHINA AOYUAN PROPERTY GROUP 中國奧園 89.20 3 GREENLAND HONG KONG HOLDINGS 綠地香港 105.69 4 FANTASIA HOLDINGS GROUP CO 花樣年 117.84 5 GUANGZHOU R&F PROPERTIES - H 富力地產 130.59 Source: Company Data, Bloomberg and iFAST Compilations *Data as at 1H 2013 Strong Solvency: Who has strong earnings to cover interest expenses? Ranked by interest coverage ratio, Table 4 shows the companies who have a stronger level of solvency, meaning they have greater ability to avoid bankruptcy and repay their debt obligations. Interest coverage ratio is measured by operating income (or earnings before interest and tax) over interest expense. Table 4: Property Developers Ranked by Interest Coverage Ratio (In FY 2013) EBIT to Interest Rank Company Name Expense Top Five Developers 1 EVERGRANDE REAL ESTATE GROUP 恆大地產 429.16* 2 LONGFOR PROPERTIES 龍湖地產 251.12 3 CHINA OVERSEAS GRAND OCEANS 中海宏洋 230.33 4 CHINA OVERSEAS LAND & INVEST 中國海外 135.10 5 AGILE PROPERTY HOLDINGS LTD 雅居樂 121.07* Bottom Five Developers 1 GREENLAND HONG KONG HOLDINGS 綠地香港 3.30* 2 SHENZHEN INTL HOLDI-PARALLEL 深圳控股 2.48* iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team iFAST Research Team 3 YUZHOU PROPERTIES CO 禹洲地產 1.86* 4 SHANGHAI INDUSTRIAL URBAN DE 上實城市開發 1.76* 5 GEMDALE PROPERTIES AND INVES 金地商置 1.20 Source: Company Data, Bloomberg and iFAST Compilations *Data as at 1H 2013 Who are the Strong Property Developers? We calculate a composite score by combining the aforementioned ratios via a standardisation method to provide a quick measure of the developer’s overall credit quality relative to its peers. Standardisation or z- score is a way to convert all indicators to a common scale. A z-score of 0 means the score is the same as the mean. It can also be positive or negative, indicating whether it is above or below the mean and by how many standard deviations. Table 5: Property Developers Ranked by weighted average Z-score Credit Rating 5-Year USD Bond Ask Rank Company Z-score YTM (Maturity Date) 1 SHENZHEN INTL HOLDI-PARALLEL 深圳控股 Baa3/BBB- 3.307% (Apr 2017) 0.96 2 CHINA MERCHANTS LAND LTD 招商局置地 A2 3.716% (Dec 2018) 0.94 EVERGRANDE REAL ESTATE B+ 10.396% (Oct 2018) 3 恆大地產 0.87 GROUP 4 SOHO CHINA LTD SOHO 中國 BB+ 5.748% (Nov 2017) 0.86 5 CHINA OVERSEAS GRAND OCEANS 中海宏洋 BBB- 5.586% (Jan 2019) 0.84 6 CHINA OVERSEAS LAND & INVEST 中國海外 BBB+ 3.835% (Mar 2018) 0.71 7 LONGFOR PROPERTIES 龍湖地產 BB 6.655% (Oct 2019) 0.46 8 GEMDALE PROPERTIES AND INVES 金地商置 BB- 7.058% (Nov 2017) 0.38 9 CHINA SOUTH CITY HOLDINGS 華南城 B 7.745%* (Jan2019) 0.34 10 CHINA RESOURCES LAND LTD 華潤置地 BBB 4.332% (Feb2019) 0.30 11 FRANSHION PROPERTIES 方興地產 BB+ 5.431% (Oct2018) 0.25 12 C C LAND HOLDINGS LTD 中渝置地 --- --- 0.14 13 AGILE PROPERTY HOLDINGS LTD 雅居樂 BB- 8.872%* (Feb2019) 0.11 14 CENTRAL
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  • China Vanke Bloomberg: 2202 HK Equity | 000002 CH Equity | Reuters: 2202.HK | 000002.SZ Refer to Important Disclosures at the End of This Report

    China Vanke Bloomberg: 2202 HK Equity | 000002 CH Equity | Reuters: 2202.HK | 000002.SZ Refer to Important Disclosures at the End of This Report

    China / Hong Kong Company Focus China Vanke Bloomberg: 2202 HK Equity | 000002 CH Equity | Reuters: 2202.HK | 000002.SZ Refer to important disclosures at the end of this report DBS Group Research . Equity 6 January 2016 H: HOLD (Downgrade from BUY) Shareholding uncertainty overshadows Last Traded Price (H): HK$20.80 (CSI300 Index : 3,540) strong fundamentals Price Target (H): HK$19.60 (6% downside) (Prev HK$23.41) Better-than-expected sales/acquisitions in Dec 2015 will likely lead to decent sales growth in 2016 A: BUY (Under review) Yet, shareholding structure is unlikely to improve in the near Last Traded Price (A): RMB24.43 (HSI : 20,981) term and potential asset restructuring is uncertain Price Target (A): RMB19.31 (21% downside) Shareholding competition will likely distract management Potential Catalyst: Better-than-expected shareholding structure efforts and affect Vanke’s long-term strategy Where we differ: Our FY15-17F EPS are below consensus Share price is under pressure after trading resumption; Analyst Downgrade Vanke-H from BUY to HOLD Ken HE CFA, +86 21 6888 3375 Uncertainty in potential asset restructuring (Details on page 3). The [email protected] difficulties are in: (i) identifying potential acquisition targets to fall in Carol WU +852 2863 8841 the definition of “material asset restructuring”, and to improve [email protected] shareholding structure (or mitigate Baoneng’s influence in Vanke’s Danielle WANG CFA, +852 2820 4915 board/strategy), as well as to strengthen Vanke’s traditional [email protected] residential and new business lines; and (ii) obtaining shareholders’ Andy YEE CFA, +852 2971 1773 approval given current shareholding structure and rich valuation.
  • Sustainable Quality Growth Prospect, Maintain “Buy”

    Sustainable Quality Growth Prospect, Maintain “Buy”

    股 票 研 [Table_Title] Van Liu 刘斐凡 Company Report: China Aoyuan (03883 HK) 究 (86755) 2397 6672 Equity Research 公司报告： 中国奥园 (03883 HK) [email protected] 25 January 2018 Sustainable[Table_Summary] Quality Growth Prospect, Maintain “Buy” 持续且有质量的增长预期，维持“买入” China Aoyuan (“the Company”) announced a positive profit alert. The Rating:[Table_Rank ] Buy Company’s net profit in 2017 is expected to record a significant increase of at Maintained 公 least 75% YoY. 评级： 买入 (维持) 司 Strategic layout in the Big Bay Area with proper unit land cost hints at 报 sustainable quality growth prospect. 76.1% of the Company's land bank was in tier-1/ tier-2/ international cities, and its unit land cost amounted to 6[Table_Price-18m TP 目标价] : HK$8.87 告 RMB1,897 per sq.m., representing 18.9% of ASP in 2017. Revised from 原目标价: HK$5.45 Company Report Contracted sales are likely to maintain fast growth momentum. During Share price 股价: HK$6.890 2017, the Company achieved RMB45.59 bn in contracted sales, up 78% YoY. With quality land bank exposure and a healthy financial position, sufficient saleable resources will be launched in 2018 and 2019. Stock performance 股价表现 The Company should justify a lower NAV discount. As we have revised up [Table_QuotePic] underlying net profit, we also revise up the target price from HK$5.45 to HK$8.87, representing a 37% discount to 2018E NAV of HK$14.08 per share, 9.1x 2018 underlying PER and 1.7x 2018 PBR. Therefore, we maintain "Buy". Risk factors include lower-than-expected contracted sales and possible failure in operational activities of overseas projects and 证 redevelopment projects.
  • China SCE Property HOLDINGS LIMITED （於開曼群島註冊成立的有限公司） (Incorporated in the Cayman Islands with Limited Liability) 股份代號 : 1966.HK Stock Code: 1966.HK

    China SCE Property HOLDINGS LIMITED （於開曼群島註冊成立的有限公司） (Incorporated in the Cayman Islands with Limited Liability) 股份代號 : 1966.HK Stock Code: 1966.HK

    中駿置業 CHINA SCE PROPERTY 控股有限公司 China SCE Property Holdings Limited HOLDINGS LIMITED （於開曼群島註冊成立的有限公司） (Incorporated in the Cayman Islands with limited liability) 股份代號 : 1966.HK Stock Code: 1966.HK 201 5 201 5 年報 Annual Report Annual Report 2015 年報 02 China SCE Property Holdings Limited Annual Report 2015 CONSOLIDATED STATEMENT OF CASH FLOWS Contents 02 Corporate Profile 41 Biography of Directors and Senior Management 03 Corporate Information 45 Corporate Governance Report 05 Financial Highlights 57 Report of the Directors 07 Review of Significant Events 66 Independent Auditors’ Report 10 Chairman’s Statement 68 Audited Financial Statements 13 Management Discussion and Analysis 161 Five Year Financial Summary 28 Major Properties Profile 02 China SCE Property Holdings Limited Annual Report 2015 CORPORATE PROFILE China SCE Property Holdings Limited (“China SCE” or the “Company”) together with its subsidiaries (collectively, the “Group”) were established in 1996 and listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) in February 2010 (Stock Code: 1966). The Group’s major businesses include investment holding, property development, property investment and property management. The Company is dual-headquartered in Xiamen and Shanghai for its business operations, while implementing regional development strategy focusing on the first- and second-tier cities in the Yangtze River Delta Economic Zone, the Bohai Rim Economic Zone, the Pearl River Delta Economic Zone and the West Taiwan Strait Economic Zone. Over 20 years of development, the Company has been well equipped with greater capacities to develop and manage properties. The Group’s properties are distributed in many cities, including Beijing, Shanghai, Shenzhen, Tianjin, Xiamen, Nanchang, Quanzhou, Zhangzhou, Longyan, Yanjiao, Anshan and Linfen.