What's new
R&F Properties released its Jan.~Nov. sales data. With94% of the FY16 target completed, we expect year-end sales tojust hit Rmb60bn.
Comments
FY17e sales: Rmb66bn, up ~10% YoY, assuming: 1) newstarts to rise 10~15% in FY17 on a basis of ~6.5mn in FY16,providing ample saleable resources; and 2) sell-through ratio tohold at around 50%.
FY16:
DPS in FY16 estimated to be Rmb0.90, with thepayout ratio staying at ~40%. The dividend yield wouldthus reach ~10%, fairly high among peers.
GPM to recover and reach ~30% in FY16, backed bythe massive delivery of high-margin products in 2H16. Weexpect the revenue contributions of Beijing, Guangzhou &Tianjin will rise to ~40% in 2H16 from 26% in 1H16, withGPM averaging above 40%.
Debt structure improving. Although net gearing may stillremain high at 160~170%, we estimate the effective interestrate may further slip below 6% in FY16 (6.5% in 1H16), thanksto the efforts at refinancing expensive offshore debts.
Valuation and recommendation
Keep earnings forecast unchanged. Maintain BUY ratingbut cut TP by 16% to HK$13.68 (5.3x 2016e P/E) due totightening measures. The company currently trades at 3.8x2016e P/E. The current TP expects 38% upside and a 40%discount to 2016e NAV.
Risks
Delivery slower than expected; tier-1/-2 markets underperform.