Reiterating as top pick for strong sales and earnings growth
We reaffirm our Buy rating and raise our target price to HKD8.26 driven by: 1）higher earnings growth on stronger sales （increased 2018F sales by 4% andFY17-19F earnings by 2-15%）； 2） recent placement; 3） December landbanking;and 4） narrower NAV discount applied. We believe its strong sales growth willsupport it to become a top-10 developer in China this year, and boost earningsto post a 74% CAGR in FY17-19F. Despite the share price outperforming thesector by 24% YTD, its current valuation is stil cheaper than the sectoraverage. We reiterate it as one of our top picks among mid/small-caps.
Raise 2018F sales to RMB188bn; potentia candidate to be a top-10 developer
Future Land achieved RMB126bn contracted sales in 2017 （+94% y-y）， ranking#13 in China. Given the rich saleable resources, we raise our 2018 salesforecast to RMB188bn （up another 49% y-y）， which may potentially surpasspeers and make it a top-10 developer in our view. Given its strong sales growthover the past two years, we expect FY17 earnings to grow 143% y-y toRMB2.8bn, and it may show an upside surprise with better margin expansion.
Aggressive landbanking to sustain strong growth; uality landbank in YRD area
The company remained aggressive on landbanking to acquire 5.4mn sqm newland in December （29.1mn sqm for full-year vs. 9.3mn GFA sold）。 Thanks to thecompany’s strategy to buy commercia complexes, the average land cost of itsnew plots （RMB2.9k/sqm） only accounts for ~20% of its 2017 ASP, providinggood margin protection despite its fast asset churn. We estimate its currentlandbank to provide ~RMB650bn saleable resources （>60% in YRD）， sufficientto sustain its strong sales growth.
Robust mal performance; renta income expected to reach RMB2bn
Besides its strong property sales, the company’s Injoy shopping malls areperforming well. With about 70 malls in the pipeline in the next three years,management expects gross renta income （including property managementfee） to reach RMB2bn in 2018 （vs. 23 malls with ~RMB1bn renta income inFY17F）。
Lower NAV discount to 40% for better sales visibility and larger scale; key risks
Our target price of HKD8.26 is based on a 40% discount （down from 45%） toour end-2018F NAV of HKD13.77. The stock now trades at 7.6x FY18F P/E anda 49% discount to NAV. Key downside risks are higher net gearing due toaggressive landbanking, and slower-than-expected sales growth and marginexpansion.