SWS Research Co. Ltd is a subsidiary of Shenwan Hongyuan Securities. 99 East Nanjing Road, Shanghai | +86 21 2329 7818 www.swsresearch.com Real Estate | Company Research Bringing China to the World 31 May 2018 Outperform Unchanged Spin-off approved COUNTRY GARDEN HOLDINGS (2007:HK) Market Data: 30 May 2018 Financial summary and valuation Closing Price (HK$) 15.18 2016 2017 2018E 2019E 2020E Price Target (HK$) 17.30 Revenue (Rmbm) 150,729 223,776 313,078 407,888 531,587 YoY (%) 35% 48% 40% 30% 30% HSCEI 11,769 Underlying net income (Rmbm) 11,661 24,288 29,669 37,190 46,225 HSCCI 4,497 YoY (%) 25% 108% 22% 25% 24% 52-week High/Low (HK$) 19.16/8.37 Net income (Rmbm) 11,163 25,614 30,067 37,607 46,663 Basic EPS (Rmb) 0.51 1.21 1.38 1.73 2.15 Market Cap (US$m) 42,063 Core EPS (Rmb) 0.53 1.14 1.36 1.71 2.13 Market Cap (HK$m) 330,027 ROE (%) 16.2% 29.7% 27.7% 27.9% 28.6% Shares Outstanding (m) 21,740 Net gearing (%) 49% 57% 48% 47% 46% Dividend yield (%) 5.4% 3.2% 3.9% 4.9% 6.0% Exchange Rate (Rmb-HK$) 1.22 PE (x) 6.0 10.8 9.0 7.2 5.8 Price Performance Chart: PB (x) 1.0 2.8 2.2 1.8 1.5 100% Note: Core EPS is calculated as if all non-recurring items are excluded. 80% 60% Country Garden’s board has approved the spin-off of Country Garden Services (CG Services). A total 40% 20% of 2.5bn CG Services shares will be distributed to all registered shareholders of Country Garden, 0% representing one CG Services share for every 8.7 Country Garden shares. CG Services recorded total -20% contracted gross floor area (GFA) of 330msqm and revenue-bearing GFA of 120msqm in 2017, only 17-05 17-07 17-08 17-09 17-10 17-11 17-12 18-01 18-02 18-03 18-04 17-06 second to Colour Life Services (1778:HK – BUY). We revise down our diluted EPS forecasts from Country Garden HSCEI Rmb1.35 to Rmb1.34 in 18E (+11.7% YoY), from Rmb1.69 to Rmb1.67 in 19E (+24.6% YoY), and from Source: Bloomberg Rmb2.10 to Rmb2.07 in 20E (+24.0% YoY). We lower our target price from HK$17.98 to HK$17.30. With 14% upside, we maintain our Outperform recommendation. Analyst Kris Li A0230511040076 Inexpensive valuation. CG Services recorded revenue of Rmb3.1bn in 2017, of which property ARG379 management services contributed Rmb2.5bn (81% of total revenue). Net profit reached Rmb400m, [email protected] ranking first among listed peers. The Hong Kong-listed property management sector surged c.35% (+86) 21 23297818×7223 YTD, with a sector valuation of 22x 18E PE. We highlight Country Garden trades below 10x 18E PE, vs 31x 18E PE for market leader Greentown Service (2869:HK – Outperform). Related Reports "Country Garden ( 2007 HK )—Open Robust sales expansion. Country Garden became China’s largest developer in 2017, with contract target" Mar21,2018 sales of Rmb550bn (+78% YoY). The firm achieved sales of Rmb257.5bn in the first four months of "Country Garden ( 2007 HK )—Alert 2018 (+30% YoY). Although management didn’t disclose any sales target for 2018, we expect to opportunity" Feb14,2018 full-year sales to exceed Rmb700bn this year (+27% YoY). We note tier-1 and tier-2 cities only "Country Garden ( 2007 HK )—Capital accounted for 3% and 11% of land reserves in 2017, respectively, vs 21% for tier-3 cities and 65% structures" Jan18,2018 for lower-tier cities. We remain confident on the company’s strong execution capability and brand recognition in lower-tier cities, despite the current property tightening measures in place. Diversified financing channels. We attribute the recent “suspension” of Country Garden’s proposed bond issuance for Rmb20bn to policymakers’ cautious stance on the property sector. The firm’s The company does not hold any equities or derivatives of the listed company mentioned heavy land expenditure in 2016-18 may raise concerns on cash flows among investors, given the in this report (“target”), but then we shall sales outlook and tightened financing. We note the company raised c.HK$23bn in January 2018 by provide financial advisory services subject to the relevant laws and regulations. Any issuing 460m shares at HK$17.13/share, and issued one-year convertible bonds with a conversion affiliates of the company may hold equities price of HK$20.56/share for HK$15.6bn, as well as senior notes with a five-year rate of 4.75% and a of the target, which may exceed 1 percent of issued shares subject to the relevant seven-year rate of 5.125% for US$950m. Moreover, the firm continues to explore other financing laws and regulations. The company may channels, such as home rental real estate investment trusts (REITs) and sales proceeds securitisation. also provide investment banking services to the target. The Company fulfills its duty of disclosure within its sphere of knowledge. The clients may contact Maintain Outperform. We estimate the contribution from the property management segment at [email protected] for relevant 1% of the company’s total revenue and profit. As a result, we lower our core EPS forecasts by 1.3% disclosure materials or log into www.swsresearch.com under disclosure to Rmb1.36 in 18E (+19% YoY), by 1.4% to Rmb1.71 in 19E (+26% YoY), and by 1.4% to Rmb2.13 in column for further information. The clients 20E (+25% YoY). Taking new acquisitions into account, we raise our net asset value (NAV) estimate shall have a comprehensive understanding of the disclosure and disclaimer upon the from HK$17.98 to HK$18.20. As sector valuation remains under pressure given pessimistic last page. expectations for the real estate industry, we increase the target NAV discount from zero to 5%, and derive a new target price of HK$17.30 (vs HK$17.98 previously). With 14% upside, we maintain our 本研究报告仅通过邮件提供给 国投瑞银 国投瑞银基金管理有限公司([email protected]) 使用。1 Outperform recommendation. JanuaryOctober31 May 12,2015 12, 2018 2010 BuildingFood,Real MaterialsEstate Beverage | Company | &Company Tobacco Research |Research Company Research 中国最大的物业开发商碧桂园宣布旗下物业管理服务板块将于 6 月 19 日于香港独立上 市并拟以股票派发形式回馈所有碧桂园股东。公司股价近期跟随板块整体持续承压，我 们仍然认可碧桂园的执行力和在三四线城市的竞争优势，且龙头房企在融资上仍占据优 势，维持增持评级。 碧桂园 5 月 29 日（周二）晚间宣布董事会已批准分拆其物业管理分部业务于 6 月 19 日 在香港联交所主板独立挂牌上市，将以特别股息形式向所有碧桂园股东宣派碧桂园服务 股份，每持 8.7 股碧桂园获派 1 股碧桂园服务，股权登记日为 6 月 12 日。创始人杨国 强家族目前持有碧桂园股份约 57%。碧桂园服务于中国管理约 440 项物业及向约 100 万 户业主提供物业管理服务，管理组合遍布中国 28 个省、市及自治区的 240 多个城市， 截止 2017 年底合同管理总面积 3.3 亿平米，收费管理总面积 1.2 亿平米，上市后将位列 物业管理板块管理面积第二位，仅次于彩生活。而在所有收费管理面积中，来自母公司 碧桂园开发的物业项目占比于 2015-2017 年间分别为 97%，96%和 89%，显示其亦开始 致力于拓展来自独立第三方开发商的物业项目管理。 2015-2017 年碧桂园服务的营业收入分别为 16.7 亿、23.6 亿、31.2 亿，其中来自物业管 理基础服务的收入分别为 14.3 亿、19.6 亿、25.4 亿，占比约 86%、83%、81%；同期， 毛利率水平为 30.6%，33.9%和 33.2%，实现归属股东的净利润 2.2 亿、3.2 亿、4.0 亿， 与已上市同业 2017 年净利润规模相比，碧桂园服务位居第一（绿城服务、彩生活、雅 生活、中海物业 2017 年净利分别为 3.9 亿，3.2 亿，2.9 亿，2.5 亿）。碧桂园服务稍早 曾在 A 股递交上市申请，而于去年末撤回，今年 3 月 19 日转向港交所递交上市聆讯材 料。今年以来，物业管理板块在香港上涨 35%，显著跑赢大盘，目前的平均估值水平大 约为 18 年 22 倍市盈率，其中龙头绿城服务的市盈率超过 30 倍。而在 A 股目前仅南都 物业（603506CH）一家主营物业管理服务的上市公司。而碧桂园目前在港股的估值 18 年 PE 仅为个位数。 碧桂园于 2017 年一跃成为中国最大的物业开发商，当年公司实现合约销售额 5500 亿 （+78% YoY），紧随其后第二和第三位分别为万科（5300 亿，+45% YoY）和恒大（5000 亿，+34% YoY）。今年 1-4 月公司实现合约销售额 2575 亿，实现同比增长 30%，同期 万科和恒大分别为 1962 亿（+2% YoY）和 2122 亿（+33% YoY）。碧桂园没有设定 2018 年销售目标，我们预计公司全年的销售额至少突破 7000 亿，较 17 年再增约三成。公司 目前土地储备一线和二线城市仅占 3%和 11%，三线城市 21%，其余更低阶城市则高达 65%。低阶城市受房地产限购限售限价影响小，但也受到按揭贷款利率上行的负面影响， 但碧桂园以其强执行力以及品牌力仍能在区域市场竞争中占据其稳固的优势。 在正式披露物业管理分拆上市时间表的前一天，碧桂园拟发行 200 亿元小公募公司债券 项目状态更新为“中止”，令市场情绪再度受压，我们认为主要也是由于对房地产再融资 政策态度继续严厉所致。过去两年间碧桂园的购地金额分别高达 1280 亿和 3270 亿，今 年前四月继续购地 835 亿，在销售展望谨慎、融资收紧的大环境下令投资者对其现金流 状况有所担心。碧桂园今年初以每股 17.13 港币的价格配股融资 230 亿港币，同时还发 行了 156 亿港币一年期零息可转债（转股价超过 20 元港币），以及 9.5 亿美金高息票 据，五年期和七年期利率分别仅为 4.75%和 5.125%。同时，公司亦继续拓展其他融资渠 道，除了持续的销售尾款资产证券化以外（2016 和 2017 年全年融资金额分别为 118 亿 和 251 亿，今年已发行 16 期累计金额 128 亿，目前的成本大概是略超 6%），公司还于 4 月末发行了第一期 17 亿人民币租赁住房 reits，利率为 5.75%。 物业管理业务对于公司整体的收入和盈利贡献都仅占到略超 1%，我们微减 2018-2020 年每股核心净利预测 1.3%，1.4%和 1.5%至 1.36 元（ +19%YoY）、 1.71 元（ +25%YoY） 、 2.13 元（+24%YoY）。同时纳入今年以来新增储备，将每股净资产值预测从 17.98 更新 到 18.2 港币。考虑到市场对房地产板块整体的悲观预期可能对板块整体的估值进一步 承压，我们将目标净资产值从 0 折价扩展到 5%折价，获得新目标价 17.30 港元（相比 原目标价为 17.98 港元）。考虑到当前股价较目标价有 14%上行空间，我们维持碧桂园 增持评级。 本研究报告仅通过邮件提供给 国投瑞银 国投瑞银基金管理有限公司([email protected]) 使用。2 Please refer to the last page for important disclosures Page 1 JanuaryOctober31 May 12,2015 12, 2018 2010 BuildingFood,Real MaterialsEstate Beverage | Company | &Company Tobacco Research |Research Company Research Spin-off of CG Services China’s largest developer Country Garden proposed the spin-off and separate listing of Country Garden Services (CG Services) on the main board of the Hong Kong Stock Exchange. Although the stock remains weak under the market’s current downward pressure, we are positive on the firm’s execution capability and competitive advantage in lower-tier cities, and expect it to keep an edge in terms of financing, despite an unfavourable liquidity outlook for the real estate sector. Country Garden’s board has approved the spin-off of Country Garden Services (CG Services). A total of 2.5bn CG Services shares will be distributed to all registered shareholders of Country Garden, representing one CG Services share for every 8.7 Country Garden shares. We note the Yeung Kwok Keung family, who founded the company, holds a 57% stake in Country Garden.