Potential privatization; reaffirming top-pick
　　Before market-open on Jul 10, Future Land applied for a trading halt on thepending announcement of potential privatization of the company （no detail hasbeen disclosed and the company remains suspended for trading）。 Future Landhas been our top-pick among small-caps since our initiation in Mar 17. We likeits strong earnings growth （49% CAGR in FY17-19F） driven by strong sales（+104%/+33% yoy in 2016/2017F） and margin expansion. It is trading at 4.3xP/E and a 57% discount to NAV （much cheaper than sector average of 6.7x P/Eand 36% discount to NAV）。 We recommend investors to buy if there is a GOand opening price below the offer price, considering its deep NAV discount.
　　Strong sales to continue; aggressive land acquisition equals 33% of end-2016landbank
　　Future Land’s contracted sales continue to be strong, and it has achievedRMB49.1bn in 1H17 （+75% yoy, 58% completion of its RMB85bn target），despite its sales rallying 104% yoy in 2016. We expect it to achieve full-yearsales of RMB86.8bn （+33% yoy）， with T1/T2/T3 cities accounting for18%/47%/35%, respectively. Also, the company continues to be aggressive onland acquisitions and it has acquired a total of 11.8mn sqm GFA with a totalland cost of about RMB32.7bn in 5M17. This is equivalent to 79% of its 5M17contracted sales value and 33% of its end-2016 landbank of 35.3mn sqm.Among the land acquisitions, 51% is from T1/T2 cities.
　　Strong earnings growth, but low valuation; key risks
Driven by its strong sales growth, we expect the company to deliver a 49%earnings CAGR in the next three years with gross margin expanding to 25-26%（vs. 23.4% in FY16）。 We estimate end-FY17F NAV of HKD6.56/share （currentprice implying a 57% NAV discount） even without factoring in its YTD landacquisitions. Also, its current valuation is at a ~50% discount to its A-share（601155 CH）， despite its strong share price performance of 77% YTD. Wereaffirm Future Land as our top-pick among small-caps （since our initiation inMarch 2017）。 Our TP is based on a 50% discount to our estimated end-FY17FNAV. The stock now trades at 4.3x FY18F P/E and 57% discount to NAV （vs.sector average of 6.7x P/E and 36% discount to NAV）。 Key risks are: 1） highergearing makes it more vulnerable to credit tightening; 2） slower sales growth.