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1、Deutsche Bank Markets Research Rating Buy Asia China Property Property Company China Ovs Grand Oceans Date 3 March 2013 Results FY12 results strong; high growth should continue in 2013 Reuters Bloomberg Exchange Ticker 0081.HK 81 HK HKG 0081 Forecasts And Ratios Year End Dec 31 2011A 2012A2013E2014E
2、2015E Sales (HKDm) 5,165.7 9,716.918,818.227,540.637,205.6 Reported EPS FD(HKD) 0.83 1.051.862.983.55 DB EPS FD (HKD) 0.70 0.931.862.983.55 DB EPS growth (%) 56.8 32.4100.560.319.4 PER (x) 9.1 8.85.93.73.1 Yield (net) (%) 0.8 1.41.41.81.8 Source: Deutsche Bank estimates, company data 1 DB EPS is ful
3、ly diluted and excludes non-recurring items 2 Multiples and yields calculations use average historical prices for past years and spot prices for current and future years except P/B which uses the year end close Reiterating Buy; HK$14.26 target price; strong growth should continue _ Deutsche Bank AG/
4、Hong Kong Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in makin
5、g their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012. Price at 1 Mar 2013 (HKD) 10.92 Price target - 12mth (HKD) 14.26 52-week range (HKD) 11.16 - 6.31 HANG SENG INDEX 22,880 Tony Tsang Research Analyst (+852) 2203 6256 Jason Ching, CFA
6、Research Analyst (+852) 2203 6205 Key changes Price target 13.10 to 14.26 8.9% Price/price relative 2 4 6 8 10 12 3/119/113/129/12 China Ovs Grand Ocea HANG SENG INDEX (Rebased) Performance (%) 1m3m12m Absolute -2.230.822.1 HANG SENG INDEX -3.53.97.0 With a very strong balance sheet, strong executi
7、on and a strong management team, COGO is well on track to grow into a leading developer, in our view. We see many more muted policy risks for Tier-3/4 cities, and hence a more stable policy environment for COGO, and further strong upside to COGOs NAV, given its strong balance sheet, the relative lac
8、k of competition against COGO for new landbank in the Tier-3 cities, and managements proven ability to expand into new Tier-3 cities. We reiterate our Buy, with a new target price of HK$14.26. Growth momentum should continue in 2013 Following a strong 2012, COGO continues to see strong sales growth
9、in 2013 (and beyond), with a contracted sales target of HK$17bn (up 25.7% YoY), well supported by sellable resources of HK$22-25bn, with the majority from Tier-3 cities. COGO sets its commencement and completion target at 2msm and 1.6msm, respectively; both represent a marked YoY increase. These sho
10、uld support COGOs fast growth moving forward. COGO is targeting net profit growth of at least another 30% YoY in 2013. Core net profit up 39%, with net cash position COGOs FY2012 results were strong, with revenue up 88.1% YoY vs. FY11, to HK$9,717m. The gross margin fell to 40.5% (FY11: 58.0%), but
11、the decline was expected. Operating profit rose 11.8% YoY, to HK$3,810m, while net profit rose 32.2% YoY, to HK$2,400m. Core profit rose by a stronger 38.7% YoY, to HK$2.1bn. As at end-2012, COGO was in a net cash position (net gearing at end-2011: 22.9%) having one of the strongest balance sheets i
12、n the sector, which should support continued above-average growth. Valuations attractive at 31% NAV discount; risks Our increased target price of HK$14.26 (from HK$13.1) is based on a 10% discount to our revised NAV of HK$15.84/shr (from HK$14.55/shr). Our target discount of 10% reflects COGOs bette
13、r execution track record. We see further upside to COGOs NAV, given its strong balance sheet and ability to expand into other Tier-3/4 cities. Key risks: unexpected economic volatility; government tightening measures. 3 March 2013 Property China Ovs Grand Oceans Page 2 Deutsche Bank AG/Hong Kong Mod
14、el updated:03 March 2013 Running the numbers Asia China Property China Ovs Grand Oceans Reuters: 0081.HK Bloomberg: 81 HK Buy Price (1 Mar 13) HKD 10.92 Target Price HKD 14.26 52 Week range HKD 6.31 - 11.16 Market Cap (m) HKDm 24,922 USDm 3,214 Company Profile China Overseas Grand Oceans Group Limit
15、ed (0081.HK), formerly Shell Electric Mfg.(Holdings) Co. Ltd. (“SMC“) was established in 1955 and became listed on The Stock Exchange of Hong Kong Limited in 1984. In 2010, China Overseas Land 2) full payment of LAT, estimated according to the formula for LAT; 3) WACC of 8.30% in our DCF; 4) cap rat
16、es of 6-8% for the investment properties of COGO in mainland China; and 5) an increase in construction costs of 15% per year over the next two years. Risks Key company-specific risks include potential competition with parent and subsidiaries of the ultimate parent company, and that COLI might not be
17、 able to keep a controlling interest in the company. Macro risks include earnings and cash flow volatility, due to the latest policy risks in the China property market and/or due to weaker- or stronger- than-expected economic performance in China and around the globe. 3 March 2013 Property China Ovs
18、 Grand Oceans Page 4 Deutsche Bank AG/Hong Kong Stronger-than-expected FY12 results Core profit at HK$2.1bn, up 38.7% YoY COGOs FY2012 results were better than expected, with revenue increasing 88.1% YoY, to HK$9,717m, against FY11. The gross profit margin was 40.5%, vs. 58.0% in FY11. Operating pro
19、fit increased 11.8% YoY against FY11, to HK$3,810m. Net profit attributable to equity shareholders of the company increased 32.2% YoY, to HK$2,400m, against 2011, while core profit increased by 38.7% YoY, to HK$2.1bn. Basic EPS was reported at HK$105.2 cents (2011 restated: HK$83.4 cents). Figure 1:
20、 COGO income statement (HK$000) For the year ended 31 Dec For the year ended 31 Dec 2011 2011 2012 2012 YoY change YoY change % % Comment Comment Sales of properties 4,995,9369,530,74990.8%Revenue from sales of properties up 90.8% on scheduled completion and delivery of nine projects with total GFA
21、of 848ksqm, of which more than 82% was sold by 31 Dec 2012 Property rental income 109,676119,8699.3% Property management fee income 60,10866,28410.3% Revenue Revenue 5,165,7205,165,7209,716,9029,716,90288.1%88.1%Total revenue up 88.1% YoY, mainly from sales of properties Cost of sales and services p
22、rovided 2,170,1385,778,733166.3% Gross profit Gross profit 2,995,5822,995,5823,938,1693,938,16931.5%31.5%Gross profit up 31.5% YoY, to HK$3,938m. GPM was 40.5% in 2012 (2011: 58%), due mainly to increasing proportion of 3rd-tier cities in sales mix Other income 29,91854,47882.1% Distribution and sel
23、ling expenses 131,272213,19462.4% Administrative expenses 201,944351,25873.9% Other operating expenses 61,5761,209-98.0% Fair value gain on reclassification of inventories of properties to investment properties 238,188-100.0% Fair value gain on investment properties 116,915364,280211.6% Fair value g
24、ain on IP up 211.6%, to HK$364m, on investment properties (Impairment loss)/reversal of impairment on assets, net 18,16826,90648.1% Gain on disposal of subsidiaries and a JCE -45,607na Subsidiaries and a JCE were disposed in 2012, generating a gain on disposal of HK$45.6m Gain on disposal of a subsi
25、diary 213,340-100.0% Gain on disposal of investment properties 37,584-100.0% Gain arising from acquisitions of subsidiaries 135,700-100.0% Others 16,068-100.0% Operating profit Operating profit 3,406,6713,406,6713,809,9673,809,96711.8%11.8%Operating profit up 11.8%, due to continuous improvement in
26、results and successful control on overhead expenses Finance costs 33,4978,590-74.4%Finance cost lowered after capitalization of HK$341m to ongoing development projects Share of results of jointly controlled entities 7,5798,88417.2% Profit before income tax Profit before income tax 3,380,7533,380,753
27、3,810,2613,810,26112.7%12.7% Income tax expense 1,575,9351,324,622-15.9% Net profit Net profit 1,804,8181,804,8182,485,6392,485,63937.7%37.7% Minority interests 10,600(84,921)-901.1% Net profit attributable to shareholders Net profit attributable to shareholders 1,815,4181,815,4182,400,7182,400,7183
28、2.2%32.2%Net profit attributable to shareholders up 32.2%, to HK$2,400m 3 March 2013 Property China Ovs Grand Oceans Deutsche Bank AG/Hong Kong Page 5 Core net profit Core net profit 1,523.414 1,523.414 2,113.482 2,113.482 38.7%38.7% Source: Company data, Deutsche Bank As at 31 December 2012, total
29、borrowings increased 37.6% YoY, to HK$5,507m, against FY11. However, due to the significant sales achieved during the year, cash and cash equivalents, plus restricted cash and deposits, were up 176.1% YoY, to HK$7,803m at end-December 2012 (2011: HK$2,826m); hence COGO was, in fact, in a net cash po
30、sition as at 31 December 2012 (net gearing ratio as at 31 December 2011: 22.9%). Figure 2: COGO statement of financial positions (HK$000) As of 31 Dec As of 31 Dec 2011201120122012 Non-current assets Non-current assets Investment properties 1,883,5632,248,932 Property, plant and equipment 27,84747,1
31、77 Prepaid lease rental on land 1,9705,479 Goodwill 70,475- Other intangible assets 37,06532,277 Interests in jointly controlled entities 73,29279,238 Deferred tax assets 294,656271,314 2,388,8682,388,8682,684,4172,684,417 Current assets Current assets Inventories of properties 12,392,88117,522,426
32、Other inventories 879963 Trade and other receivables, prepayments and deposits 1,903,3912,792,833 Prepaid lease rental on land 52174 Amounts due from jointly controlled entities 49,34045,632 Amounts due from non-controlling interests 11,96520,538 Tax prepaid 108,29074,343 Restricted cash and deposit
33、s 805,2041,821,131 Cash and cash equivalents 2,021,2235,982,086 17,293,22517,293,22528,260,12628,260,126 Current liabilities Current liabilities Trade and other payables 2,172,5894,034,650 Sales deposits received 3,786,6087,060,789 Amount due to a jointly controlled entity 246- Amounts due to non-co
34、ntrolling interests 573,172799,119 Consideration payable for acquisition of a subsidiary 78,327- Taxation liabilities 2,193,4091,841,868 Borrowings 1,387,0662,052,536 10,191,41710,191,41715,788,96215,788,962 Net current assets Net current assets 7,101,8087,101,80812,471,16412,471,164 Total assets le
35、ss current liabilities Total assets less current liabilities 9,490,6769,490,67615,155,58115,155,581 Non-current liabilities Non-current liabilities Borrowings 2,615,6413,454,443 Convertible bonds -1,650,543 Deferred tax liabilities 1,443,0051,441,497 4,058,6464,058,6466,546,4836,546,483 Net assets N
36、et assets 5,432,0305,432,0308,609,0988,609,098 Capital and reserves Capital and reserves Share capital 15,21522,822 Other reserves 2,836,2303,478,853 3 March 2013 Property China Ovs Grand Oceans Page 6 Deutsche Bank AG/Hong Kong Retained profits 2,218,4874,327,616 Proposed dividend 76,075136,934 Equ
37、ity attributable to owners of the company Equity attributable to owners of the company 5,146,0075,146,0077,966,2257,966,225 Non-controlling interests 286,023642,873 Total equity Total equity 5,432,0305,432,0308,609,0988,609,098 Source: Company data, Deutsche Bank 3 March 2013 Property China Ovs Gran
38、d Oceans Deutsche Bank AG/Hong Kong Page 7 Analyst meeting takeaways Strong growth momentum should continue Following strong 2012, Chairman Hao continues to see strong contracted sales growth in 2013 (and beyond), with contracted sales target at HK$17bn (up 25.7% YoY from FY12 actual sales HK$13.5bn
39、). This is well-supported by sellable resources of HK$22- 25bn, with majority from Tier-3 cities. COGO set its construction commencement and completion target at 2msm and 1.6msm respectively, with 30-40% of construction start falling in 1H13, with the rest in 2H13. Both numbers will mean a marked in
40、crease from 2012, and should support COGOs speedy growth moving forward. As a reference, actual 2012 construction commencement and completion amounted to 1.842msm and 0.848msm respectively. In 2013, CAPEX target is set at HK$12bn (up from 2012s HK$7.5bn), of which HK$6bn is land premium and HK$6bn c
41、onstruction cost. In terms of expansion, COGO plans to enter at least 3-5 new cities this year, well supported by its very-strong financial position (end-2012: net cash). COGO should continue its high growth momentum in 2013, with a target net profit growth of 30% YoY in 2013 (following a 32.2% grow
42、th in 2012). Figure 3: COGO 2013 operational targets 2013 Annual Target 2013 Annual Target 2012 Actual 2012 Actual Net Profit 30% Growth 32.2% Growth Contracted Sales (HK$m) 17,00013,521 New Land Acquisition (ksqm) 4,0003,679 GFA Completed (ksqm) 1,600848 New Project Commencement (ksqm) 2,0001,842 T
43、otal CAPEX (HK$m) 12,0007,500 Source: Company data, Deutsche Bank Financial position turning even stronger COGOs financial position was further enhanced in 2012. As of end-Dec 2012, COGO had a total cash on hand of HK$7.8bn, up 176% YoY, while net gearing improved to net cash from 22.9% as of end-De
44、c 2011. According to the Chairman, the better-than-expected financial position (net cash as of end-2012) is attributed to strong execution (especially sales and cash collection). COGOs cash collection rate was higher than 80% in 2012 (just took 1-2 months for COGO to collect cash in Tier-3 cities vs
45、. peers at 3-4 months), and considering especially that Tier-3 cities normally have a lower cash collection than higher-tier cities (due to more first-time homebuyer and less availability of financing comparing). Chairman Hao believes this highlighted the integrated strength of COGO, excellent execu
46、tion and its corporate culture, with strong teamwork across whole hierarchy of COGO. 3 March 2013 Property China Ovs Grand Oceans Page 8 Deutsche Bank AG/Hong Kong Financial structure further optimized; average borrowing costs improved to 4.8% Since 2010, COGO has worked very hard to optimize debt s
47、tructure (i.e., extending debt cycles and increasing the proportion of offshore financing). For instance, COGO has completed the issuance of HK$2.2bn 2.00% Guaranteed Convertible Bonds due 2017 in March 2012, further improving COGOs overall borrowing costs and duration of borrowings. Figure 4: COGO
48、Total borrowing trend Y Year ear Total borrowing (HKDm) Total borrowing (HKDm) Average Rate Average Rate 2010 2,247.505.66% 2011 4,002.705.60% 2012 5,507.004.82% Source: Company data, Deutsche Bank As at end-2012, total borrowings of COGO were HK$5.51bn, with average rate of 4.8% (down 0.8ppt from 2
49、010). As at end-Dec 2012, 41% of COGOs total borrowings were denominated in RMB, while 59% were denominated in HKD. More importantly, 62.7% of total borrowings will be due for repayment after one year. Figure 5: COGO Accounted currency of total debt Figure 6: COGO Total debt duration 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201020112012 RMBHKD/USD 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100