[ET Net News Agency, 14 November 2017] Morgan Stanley sees near-term share price
correction as a good entry point for China property sector. Consolidation and decline in
land supply are two structural drivers for the industry over the next five years.
The research house sees three near-term catalysts: (1) Adoption of HKFRS 15 in 2018, (2)
Guangdong-HongKong-Macau Greater Bay Area announcement by end-2017, (3) strong margins
into 2018.
Morgan expects the top five players' market share to rise from 17% now to 33% by 2021,
implying 16% CAGR in contracted sales, despite flattish industry sales. This should drive
re-rating for the industry, since it increases growth outlook and lowers volatility.
In order to preserve farmland, the State Council's 2016-30 land supply plan suggests a
30% decline of annual land supply in the next five years, a positive for the industry
because it reduces the risk of overbuilding and facilitates consolidation, Morgan noted.
It expects listed developers' contracted sales to grow at 20% in 2018. The industry
average for market cap/trailing 12-month (up to September-2017) contracted sales is 0.59x,
below the 2012-17 median of 0.69x. Industry average P/E is 6.2x for 2018, and Morgan
projected 23% earnings CAGR for 2017-19, versus 13% for 2012-16.
Morgan revised its ratings and target prices for the property counters it covers as
follows:
Name Rating Target Price
-----------------------------------------------------------------------------
(03883) Aoyuan Overweight from Equal-weight HK$5.5 from HK$3.3
(00884) CIFI Overweight HK$5.25 from HK$4.85
(02007) COGARD Equal-weight HK$12.2 from HK$8.7
(00081) COGO Overweight HK$5.4 from HK$4.8
(00207) Joy City Overweight HK$1.75 from HK$1.35
(01813) KWG Overweight HK$11 from HK$7
(03380) Logan Overweight HK$10 from HK$9
(00960) Longfor Equal-weight HK$19.8 from HK$12.7
(00119) Poly Underweight HK$3 from HK$2
(02777) R&F Overweight from Equal-weight HK$24.3 from HK$15.45
(00813) Shimao Overweight HK$20.2 from HK$16.8
(03377) Sino Ocean Overweight HK$6.6 from HK$5.4
(01918) Sunac China Overweight HK$47 from HK$28
(01233) Times Overweight HK$8.71 from HK$7.1
(02202) Vanke Equal-weight HK$26.5 from HK$21.5
(00123) Yuexiu Property Overweight HK$2 from HK$1.64
(KL)