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Company Flash Note China / Hong Kong Company Flash Note Refer to important disclosures at the end of this report Page 1 DBS Group Research . Equity 15 September 2015 Analyst: Carol WU +852 2863 8841 Evergrande Real Estate [email protected] (3333 HK) Danielle WANG CFA +852 2820 4915 HOLD; HK$4.55 [email protected] Price Target: HK$5.35 (under review) (18% upside) Andy YEE CFA, +852 2971 1773 [email protected] Ken HE CFA +86 21 6888 3375 [email protected] Evergrande SG takeaways: Transforming into a holding company • Investors’ focus: margin trend, progress of non- Provider businesses, respectively and is considering buying a property business spin-offs, and balance sheet health listco in Hong Kong for its dairy, grain, and oil businesses. Evergrande expects to own over six listcos to host its non- Plans to reduce funding cost by exploring onshore • property businesses. The key is to enhance disclosure and private bond market and reducing perpetual securities run these businesses separately without capital input from • May not raise funds by spinning off its other the property business. However, capital can only be raised businesses anytime soon once the listcos achieve a certain level of profit. • Share buyback is restricted by quota; aims to maintain Share buyback to continue but restricted by free float a high dividend payout requirement. Evergrande has utilised 7.3% out of its 10% share buyback quota YTD. The company is hosting board meeting to extend the 10% quota. However, it can only Exploring onshore private bonds to lower funding costs. buy back another 8% in maximum, given its free float Evergrande reduced its average funding cost from 9.3% in requirement of 22% (vs. current 30%). Evergrande’s free 2014 to 8.4% in 1H15 and the company expects to lower float requirement is different from generate rule of 25% this further to 8% by end-15. Although the company has due to special treatment at IPO. used up its quota for public corporate bonds of Rmb20bn, it is exploring the onshore private bond market to raise FY15 contracted sales may reach Rmb180bn. The company funds at a lower cost to refinance its trust loan (Rmb48bn) brought forward 11.1m sm of saleable resources to 2H15 at c.10% cost. The company is also committed to repay and can launch 19m sm in 2H15. Assuming a 60% sell- Rmb13bn of project-level perpetual securities by using sales through rate and Rmb7.6k/sm ASP, 2H15 presales can proceeds of its respective projects in 2H15. potentially reach Rmb132bn and bring full-year sales up to over Rmb200bn. Although the company may slow down its Interest cost savings will help support net profit margins. project launches after achieving its target of Rmb150bn, Assuming that Evergrande can maintain its debt at the presales growth is likely to be over 30%, better than peers. current level, lower its average funding cost to 8%, and reducing perp by Rmb13bn, it will save Rmb3.8bn in Aiming to see improving gross margins in 2H15. The interest cost annually, compared with its 1H15 core company expects full-year gross margin to be at the c.30% earnings of Rmb4bn. Onshore private bond may be issued level. Evergrande’s 8M15 ASP was 6% higher than FY14 at 6% to 7%, compared with development loan of c.6.8% ASP, which the company expects to support its gross in 2H15 (vs. current 7.17%). margins in 2016 and 2017. Projects in tier 1, tier 2, and tier 3 cities accounted for <1%, 54%, and 46% of 1H15 May not raise funds through spin-offs of other businesses revenues respectively. Tier 1 cities’ revenue contribution will but disclosures will be enhanced. Evergrande aims to list its increase starting 2H16. In our view, the margins of projects water, football, and culture businesses on the National in tier 1 cities are likely to be lower. Evergrande will need to Equities Exchange and Quotations System. The company intensify its efforts on cost savings to maintain current currently owns two listco (708.HK and 136.HK) for its margins. healthcare and Integrated Internet Community Service www.dbsvickers.com ed-TH / sa- AH China / Hong Kong Flash Note Comfortable with current land bank exposure. Evergrande’s Intends to maintain dividend payout at 50% of net profit land bank splits in tiers 1/2 and 3 cities are currently at 53% attributable to shareholders (after perpetual distribution). and 47% respectively. In terms of land cost expenditure, The company intends to maintain a high dividend payout of Evergrande spent 71% of its total land cost in tier 1/2 cities 50% including IP revaluation gain. Bond covenants require and 29% in tier 3 cities. Land acquisition activities slowed FCCR of 2.75x when hosting the board meeting regarding down from previous years but still expects to drive 20% to dividend payment. Evergrande is now trading at 6.4x FY16F 30% presales growth in the coming three years. PE (vs. 6.5x for its large-cap peers). Maintain HOLD with unchanged TP of HK$5.35, based on SOTP valuation. Discount to NAV Discount to NAV band % HK$ 0 10.0 (10) 9.0 (20) 8.0 -16% (30) 7.0 -32% (40) +1SD -45.6% 6.0 (50) Avg: -56.8% 5.0 -48% (60) 4.0 -64% 3.0 (70) -1SD -68.1% (80) 2.0 -80% 1.0 (90) Jul-12 Jun-13 Feb-12 Oct-14 Apr-10 Sep-10 Sep-15 Dec-12 Nov-09 Nov-13 Mar-11 Mar-15 Jul-12 Aug-11 May-14 Jun-13 Feb-12 Oct-14 Apr-10 Sep-10 Sep-15 Dec-12 Nov-09 Nov-13 Mar-11 Mar-15 Aug-11 May-14 Source: Thomson Reuters, DBS Vickers Source: Thomson Reuters, DBS Vickers PE chart PB chart x x 16 3.5 14 3.0 12 2.5 10 2.0 +1SD: 1.5x 8 1.5 +1SD: 6.3x Avg: 1x 6 Avg: 4.7x 1.0 -1SD: 0.4x 4 -1SD: 3x 0.5 2 0.0 Jul-12 Jul-13 Jul-12 Jul-13 Jan-13 Jan-13 Jun-11 Jun-11 Feb-14 Feb-15 Feb-14 Feb-15 Sep-15 Sep-15 Dec-11 Dec-11 Nov-09 Nov-10 Nov-09 Nov-10 Aug-14 Aug-14 May-10 May-10 Source: Thomson Reuters, DBS Vickers Source: Thomson Reuters, DBS Vickers Page 2 China / Hong Kong Flash Note Valuation comparison 3-mth daily Net Disc/ 15-Sep Mkt trading 12-m EPS gth PE PE Yield Yield ROE ROE Gearing P/Bk NAV (Prem) Price Cap value Recom target 15F 16F 15F 16F 14A 15F 15F 16F 14A 14A to NAV Company Name Code HK$ HK$bn US$m HK$ % % x x % % % % % x HK$ % Large cap China Overseas* 688 HK 22.75 224.3 81.5 Buy 38.96 (8) 7 7.3 6.8 2.4 2.8 17.2 15.5 31.7 1.4 25.4 10.6 Country Garden* 2007 HK 2.71 61.2 10.1 Buy 4.86 (20) 8 5.1 4.7 6.1 6.4 15.4 14.8 54.2 0.7 4.4 38.4 CR Land* 1109 HK 18.54 128.5 47.6 Buy 24.98 (28) 16 10.2 8.8 2.7 2.7 11.0 10.9 42.7 1.1 27.5 32.6 China V anke 'H'* 2202 HK 16.7 184.5 26.7 Buy 23.41 8 17 8.9 7.6 3.6 3.9 18.2 18.6 5.4 1.7 22.4 25.4 Dalian Wanda 'H' 3699 HK 46 208.3 48.4 NR n.a. (41) 24 9.5 7.6 2.6 3.0 11.4 13.6 60.4 1.1 n.a. n.a. Evergrande* 3333 HK 4.55 66.0 58.6 Hold 5.35 (50) 37 8.8 6.4 11.3 2.8 5.7 7.8 85.9 0.5 9.4 51.7 Longfor 960 HK 9.51 55.4 5.1 NR n.a. (19) 11 6.3 5.7 3.6 3.7 14.4 14.1 57.1 1.0 n.a. n.a. Shimao Property* 813 HK 11.22 39.0 15.0 Buy 13.50 (7) 6 4.3 4.0 7.6 8.0 15.2 14.6 58.6 0.7 28.5 60.7 A v erage (21) 16 7.5 6.5 5.0 4.2 13.6 13.7 49.5 1.0 36.5 Mid cap Agile Property* 3383 HK 3.76 14.7 6.7 Hold 3.66 (27) (10) 3.5 3.9 10.5 7.1 8.8 7.4 75.2 0.3 16.6 77.4 China South City*^^ 1668 HK 1.91 15.3 8.9 Buy 2.96 (45) 17 7.1 6.1 7.3 6.0 8.1 9.1 78.4 0.6 5.2 63.1 COGO* 81 HK 2.41 5.5 1.2 Buy 4.30 29 49 3.4 2.3 2.1 2.1 12.5 16.1 70.4 0.2 9.2 73.8 Franshion* 817 HK 1.87 20.0 5.4 Buy 2.97 (47) 24 6.5 5.2 6.1 4.6 7.9 9.3 58.1 0.5 4.5 58.8 Greentown 3900 HK 5.74 12.4 5.5 NR n.a. 67 8 3.5 3.3 0.0 4.5 10.9 11.0 76.7 0.4 18.5 69.0 Guangzhou R&F 2777 HK 7.32 23.6 10.3 NR n.a.
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    Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. SHANGHAI ZENDAI PROPERTY LIMITED 上海証大房地產有限公司 (Incorporated in Bermuda with limited liability) (Stock code: 755) CHANGE OF NON-EXECUTIVE DIRECTORS RESIGNATION OF NON-EXECUTIVE DIRECTORS The board (the “Board”) of directors (the “Directors”) of Shanghai Zendai Property Limited (the “Company”, and together with its subsidiaries, the “Group”) announces that, with effect from 23 April 2020: 1. Mr. Gong Ping has resigned as a non-executive Director of the Company due to internal management and work needs of the Fosun Group; and 2. Ms. Jiang Zhengyan has resigned as a non-executive Director of the Company due to her resignation from the Fosun Group. Each of Mr. Gong Ping and Ms. Jiang Zhengyan has confirmed that he/she has no disagreement with the Board and there is no matter relating to his/her resignation as described above that needs to be brought to the attention of the holders of securities of the Company or The Stock Exchange of Hong Kong Limited (“Stock Exchange”). The Board would like to take this opportunity to express its gratitude to each of Mr. Gong Ping and Ms. Jiang Zhengyan for his/her contributions to the Company during his/her term of office. APPOINTMENT OF NON-EXECUTIVE DIRECTORS The Board announces that, with effect from 23 April 2020: 1.
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