Beating our expectation; policy wind blows up future uncertainty;remain Buy with TP trimming down
September monthly contracted sales data beats our estimation.Shenzhen Investment (“SZI”) announces it's unaudited contracted salesfor September 2016. The group’s contracted sales for Septemberamounted to approximately Rmb2.34bn, up 141% MoM or 88% YoY,beating our forecast, and we raise our FY2016E contracted sales toRmb27.85bn. The contracted sales area was approximately 88,767sq.m., up 90.1% MoM or 13% YoY. Contracted sales for Septemberwere primarily generated from UpperHills, Guanlan Rose Garden andMaanshan Shumyip Huafu projects.
Whole-year contracted sales figure in line with expectation. As SZIcontract sales growth peaked during July, we concluded policyuncertainties and the week supply side hindered the headline figuresfrom continuous expansion, and the company would re-pick its paceduring the following months as new projects being launched to themarket. A strong rebound in August and September found such pointvalid. As at the end of September, SZI recorded a total contracted salesof approximately Rmb17.96bn, up approximately 30.1% YoY, and totalcontracted sales area was approximately 767,126 sq m., down 3.74%YoY. Meanwhile SZI has achieved 97.08% of its contracted sales targetfor the year. We still consider contracted sales will hit Rmb22.38bn inFY2016E, up 16.8% YoY.
Upcoming new projects to be on sale in August. As the governmentproposed a new round of tightening policy on national housing market,we believe the impact on first-tier cities such as Shenzhen is similar, ifnot stronger, to the previous round proposed in 2013. For Shenzhenmarket, new policy limits first home buyers to only one unit and downpayment raised to 50% for those who has mortgage record. As SZI hasalready positioned itself against tightening policy wind with strong landbank and competitive land acquisition strategy, we believe such policychange wouldn’t bring significant impact on its future assets portfoliovalue. Thus we slightly adjust our FY2017E NAV to HK$12.80/share.Meanwhile, we believe the tightening policy will further boost the marketprice of commercial properties, hence benefitting SZI on investmentproperty sector. However, in medium-run, we are uncertain on thepossibilities of further tightening policy regarding Shenzhen market’ssensitivity to purchase restrictions.
Reiterate Buy. As market sentiment towards China property sectorcooled down after nationwide tightening policies were announced, weincrease our discount to NVA from 60% to 65% responding to thechange in industry average. We reiterate our Buy rating and adjust ourTP to HK$4.47.