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REAL ESTATE:DECEMBER PROPERTY A-SHARES:CONTINUE TO BUY LEADI

时间:2018-01-05 09:10    作者:admin     点击:

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The A-share property sector rallied recently as property 博天堂918注册salesrecovered in tier-1/2 cities while concerns about tightening policiesfaded. In a previous report, we predicted 40% price upside for majorproperty A-shares. We expect the rally to continue and still adviseinvestors to buy.
Reasoning
Strong earnings growth outlook driving rally. We forecast a >25%CAGR for leading developers in 2017/18. As projects available for salewill likely increase >30% in 2018, sales growth should remain high at40%, supporting strong bottom line growth in 2019/20. Thepromising outlook underpins our prediction of 40% price upside.
Recovering sales in tie-1/2 cities remain a catalyst. Performance ofthe A-share property sector was less impressive over January–October due to weak sales in tier-1/2 cities and concerns aboutfurther policy tightening. However, property sales in these cities andmarket sentiment both recovered after the 19th CPC Congress. Weexpect sales to recover further in December and 2018, supporting thefundamentals and stock prices of leading developers.
Property stocks account for just 3% of mutual funds’ total equityportfolio, a 10-year low. Market valuations of leading developers arequite attractive. Vanke, Poly and CMSK are trading at only 10.4x, 8.0xand 10.6x 2018e P/E.
Earnings forecast and valuation
A-share property stocks are trading at 11.7x/9.6x 2017/18e P/E, withan 18% discount to 2017e NAV. We recommend: 1) leadingdevelopers benefiting from recovering sales in tier-1/2 cities, such asVanke, Poly and CMSK; 2) companies benefiting from theconstruction of Xiong’an and the coordinated development of Beijing,Tianjin and Hebei, such as CFLD, Risesun and Vanke; and 3) firmsoperating a long-term apartment rental business, such asWorldUnion, Vanke, Poly, and CMSK.
Risks
Nationwide policy tightening; macroeconomic downturn □ .E.r.i.c. .Y.u. .Z.H.A.N.G./.P.u. .W.A.N.G .中.国.国.际.金.融.股.份.有.限.公.司

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