HSBC Global Research said China Vanke's (02202) placement of 316m new H shares does not come as a surprise as it is a further step towards
enlarging H-share capital to meet HKEX's 15-25% public float requirement.
Although the new plan for issuing H shares is pending AGM approval, the research house noted Vanke's H shares will account for 16.3% of total share capital on completion of the placement, which will satisfy HKEX's lower bar of 15%.
Vanke stands out with its strong return profile, having one of the highest FY2020 ROEs and earnings security (90% FY20 revenue lock-in ratios) among peers, HSBC said.
Therefore, it sees the current valuation as undemanding, at with 6.1x FY2020 core PE and a 49% NAV discount, both hovering around historical lows, versus 8x-10.5x FY2020 PE of quality peers including CRL (01109), Longfor (00960) and Shimao (00813).
HSBC maintained its "buy" rating, with an unchanged target price of HK$30.6.
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