Revised target price to $0.78. The co posted a net loss of RMB13.5m in 1Q10 due mainly to the absence of property sales revenue. Phase II sales at San Ya Wan only come in 2H10. Net profit will stay muted in FY10 until the pre-sales of the IFC and Da Ping projects take off at end-2010. We lower our TP to $0.78 from $1.04 to factor in lower ASP and rental assumptions. Near term catalysts: the signing of retail tenancy agreements at the IFC & bidding outcome for the Wuyi land parcel Jun 10.
JPM has also initiated coverage Ying Li with a Neutral rating and PT of $0.60 based on 25% discount to RNAV, citing that the Chongqing property developer is transiting to hold at least 60% of its commercial properties under development for recurring income, which is expected to reach Rmb400m in 2014 from Rmb44m last year. The group plans to complete 190k sqm of NLA annually over the next 5 years, up from 65k sqm p.a. in the past 5 years.
There is a long term intention to set up a Reit for its rental portfolio. The stock is trading at 50% discount to RNAV vs 45% for its Chinese peers. Backed by 1.1m sqm landbank, of which 52% is in prime CBD area, upside risks include potential plot ratio increase for its San Ya Wan project. Key dampeners are continued policy/tax, financial and execution risks.
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