What’s new: Poly Property announced on Thursday after market close that its Dec salesrose by 28% MoM or 53% YoY to RMB2.3B, and FY12 sales finally arrived at RMB23.4B,or 48% higher than 2011. When GFA sold increased by 17% YoY to 2.5 mn sq.m., ASPachieved thereof increased by 27% YoY to RMB 9,323 per sq.m., thanks mainly to therising contribution of sales from 1st/2nd tier cities as well as high-end projects.
FY13 sales pipelines would beat 5mn sqm under consevative estimates. The companymay not officially announce its FY13 sales target until this Feb, however, we’re told totalsaleable resources this year will at least amount to 5mn sqm, including 2 mn sq.m.stocks carried from 2012 and 3 mn sq.m. new salable resources to get pre-sale permit in2013. And totally there’re 8 brand new projects planned to be launched this year, whichare located in Shanghai, Hainan, Wuhan, Jinan and Kunming.
We estimate its FY13 sales promising to rise by another 30% to RMB30B. We’velearned that sell-through rate of Poly in 2012 is around 55%, and we believe it’s likely toimprove further to approx. 60% this year given recovery already extended to propertymarket in lower tier cities since Q4 12. For the same reason, we expect ASP in 2013 islikely to see moderate rise of 5%. Under such assumptions, we extimate Poly’s FY2013contracted sales would beat ~RMB 30B, implying a YoY growth of 30%.
Q1 2013 sales may keep solid thanks to subscriptions carried from 2012. According tothe company source, subscription sales accomplished in 2012 is around RMB 26B, thatmeans there’s approx. RMB 3B subscription sales pending for final contract signingcarried into 2013. This would support Poly’s contracted sales at firm even in theseasonal low Jan and Feb, and may point to an encouraging YoY growth for this Q1 giventhe lower base in 2012 (~RMB2B).
Differ from consensus: Our grass root monitor showed that physical market recoveryhas begun to spread from 1st/2nd tier cities into 3rd4th tier cities since Q4 12. GivenGuiyang and Naning, which we classify into 3rd tier cites, account for 50% of Poly’s totallandbank and one-third of its total sales, we believe Poly will be the major beneficiary.
Valuation is still convincing: Given the better ASP outlook, we revise up our NAVestimates by 6% to HKD 12.63. Currently it is trading at 49% disc to NAV, 6.7x 13PE and0.7x 13PB, still very attractive as compared to sector average of 31% disc to NAV, 9.2x13PE and 1.3x 13PB. We narrow our target NAV disc from 50% to 40% and arrive at new6-M TP of HKD 7.58, implying 19% upside potential, outperform rating reiterated.