2017年J.P. 摩根-中国-房地产行业-中国房地产：尽善尽美-2017.9.25-JPMORGAN-China property sector As good as it gets-佰策地产文库.pdf

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1、 Asia Pacific Credit Research 25 September 2017 China property sector As good as it gets Asia Credit Research Daniel Fan AC (852) 2800-8988 J.P. Morgan Securities (Asia Pacific) Limited See page 69 for analyst certification and important disclosures. J.P. Morgan does and seeks to do business with c

2、ompanies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Riding on the strong phy

3、sical market since early 2016, most developers reported much improved 1H17 results that showed deleveraging, improved interest services capability and better liquidity. Outliers are those adopting asset-light models or excessive debt-funded expansion. Sales momentum remains healthy as suggested by t

4、he upward revision to full-year sales targets by a quarter of developers in our coverage. However, we believe the property sector has probably hit the peak of its current cycle. We see risk of a cyclical slowdown in 2018 after a possible overdraft of demand since 2016. In our view, the good news has

5、 largely been priced in for the sector as a whole, and it is time to cherry pick and segregate winners from losers, leaving us with only a handful of picks and some pans. Financials generally improved in 1H. Leverage in terms of net debt/EBITDA improved for most developers on better margins and stro

6、ng cash inflow. In general, EBITDA margin improved as a result of higher ASP given the still strong physical housing market, expansion into higher-margin upper tier cities and lower operating costs due to economies of scale. On the back of stronger- than-expected 1H17 sales, around 25% of developers

7、 under our coverage revised upwards their respective full year targets suggesting sales momentum could stay healthy in the near term. Another positive sign is that some developers like Yuzhou, CIFI, Sunac, China SCE and Evergrande have capitalized on the strong equity market to raise equity and thus

8、 strengthened their balance sheets. Winners are those able to ride the strong physical market. In the IG space, two companies stood out, i.e. 1) Sino-Ocean benefitted from its aggressive sales push that should eventually help to lower its higher-than-peer leverage; and 2) Dalwan delivered strong num

9、bers but these were unfortunately clouded by uncertainties surrounding its overseas investments and chairman. The rest adopting a more balanced approach delivered satisfactory results but we also see limited room for improvement going forward. In the double-B space, some winners are 1) Country Garde

10、n that achieved strong revenue growth while maintaining credit profile intact, which later led to an upgrade by Fitch to BBB- from BB+, and 2) CIFI has consistently been able to deliver stable results. In the single-B space, a few credit improvement stories are 1) Evergrande that successfully brough

11、t down its leverage to a normal level through cash flow generation from sale; 2) Kaisa managed to normalize its topline which is a good start but which is yet to filter through to its credit profile; 3) Powerlong is also a credit improvement story in its transition to relying more on rental over the

12、 medium term; and 4) Central China delivered satisfactory results, making it an exception among those adopting asset-light models. Some outliers include those using improper asset light models or excessive debt-funded expansion. Fantasia lost out with its asset-light model i.e., contracted sales mas

13、sively underperformed its peers. Greentown is also a weaker performer because of its defensive stance in a strong market. We are more comfortable on the latter given the CCCGs ownership and would avoid the former. Sunac is too focused on boosting its topline at the expense of a more vulnerable balan

14、ce sheet especially during a possible cyclical down-cycle next year. Glorious remains an asset rich but cash flow poor company; it company Completed 24 Sep 2017 04:09 PM HKT Disseminated 25 Sep 2017 07:00 AM HKT 2 Asia Pacific Credit Research 25 September 2017 Daniel Fan (852) 2800-8988 could poten

15、tially speed up its launch of Shanghai Bay Project for debt servicing. Property cycle is probably near the peak of current cycle. Looking ahead, we expect the sector to see a cyclical slowdown in the physical market in 2018, as the sectors strong contracted sales performance since 2016 could be an o

16、verdraft of future demand. Tighter regulations in upper cities could stay and slow sales volume. While developers have moved to lower tier cities for volume growth, it remains to be seen whether such initial surge in demand could be sustained without the presence of organic demand. Good news largely

17、 priced in. In our view, the satisfactory 1H17 results have largely been priced in. China property bonds provide limited yield pick-up across EM regions or US HY, and sectors, including China banks AT1. Intriguingly, the font-end of China BB property names are trading flat if not inside of China ban

18、k AT1 issued by some systematically important banks. As much as we recognize the tail risk of AT1 instruments in the case of a systemic shock to Chinas banking system, we are more comfortable owning high-quality Chinese bank AT1 instead of China double-B property bonds, especially taking into consid

19、eration our expectation of strong government support to such systemically important banks. Tight valuation leaves us a handful of good picks. Our top picks are: 1) Sino- Ocean 19s and 20s as yield pick-up plays in the IG space, and its leverage, albeit on the high side, is on an improving trend; 2)

20、we see value on Dalwan 18s and 24s as they are trading at single-B valuation due to headlines news but its fundamentals are improving as it sold some property and hotel assets and started to pare back its overseas investment (see our EM Corporate Top Trade Report for details); 3) we like the 9% Gree

21、ntown perps which are likely to be early redeemed in 2019 for two-year carry; 4) Central China 6% 18s and Powerlong 18s are relatively safe short-dated carry for investors taking a defensive view; 5) Evergrande 20s and 21s still provide reasonably yield pick- up especially given its normalized lever

22、age; 6) Kaisa 20s also provide reasonably yield pick-up and its recent retap would ease the refinancing risk on the short-end of the curve; and 7) Glorious remains our event play for investors with high risk appetite, which, we take comfort on its high asset coverage. Top pans to avoid. Our top pans

23、 are 1) Sunac 20s and 22s are more vulnerable to the developers high leverage in the expected cyclical downturn in 2018; 2) Guangzhou R and 3) Fantasia 20s and 21s are over-priced given its weak 1H17 results and weak contracted sales so far this year. In general, we would also avoid the long end of

24、the credit curve. 3 Asia Pacific Credit Research 25 September 2017 Daniel Fan (852) 2800-8988 Table 1: China property IG credits -Summary of recommendations Recommendation Issuer Coupon Maturity O/S Amt (US$M) Rating Offer price YTM(%) Z-spd (bp) Duration Current Previous China Jinmao 4.70% 26-Oct-

25、17 194 Baa3/BBB- 100.25 1.63% -176 0.08 N N China Jinmao 5.38% 17-Oct-18 131 Baa3/BBB- 104.00 1.55% 41 1.01 N N China Jinmao 5.75% 19-Mar-19 500 Baa3/BBB- 104.49 2.63% 94 1.42 N N China Jinmao 6.75% 15-Apr-21 500 Baa3/BBB- 111.65 3.25% 140 3.10 N N China Jinmao 3.60% 3-Mar-22 500 Baa3/BBB- 100.61 3.

26、45% 150 4.06 UW UW China Overseas Land 3.38% 29-Oct-18 500 Baa1/BBB+ 101.38 2.09% 50 1.06 N N China Overseas Land 4.25% 8-May-19 800 Baa1/BBB+ 102.81 2.47% 77 1.54 N N China Overseas Land 5.50% 10-Nov-20 1,000 Baa1/BBB+ 108.52 2.64% 82 2.83 N N China Overseas Land 3.95% 15-Nov-22 700 Baa1/BBB+ 104.2

27、7 3.04% 103 4.58 N N China Overseas Land 5.38% 29-Oct-23 500 Baa1/BBB+ 111.93 3.20% 122 5.14 N N China Overseas Land 5.95% 8-May-24 700 Baa1/BBB+ 115.54 3.31% 129 5.45 UW N Dalian Wanda 4.88% 21-Nov-18 600 Ba1/BB 99.22 5.57% 405 1.09 OW OW Dalian Wanda 7.25% 29-Jan-24 600 Ba1/BB 100.50 7.15% 521 4.9

28、6 OW N Longfor 3.88% 13-Jul-22 450 -/- 101.63 3.50% 158 4.32 UW UW Longfor 6.75% 29-Jan-23 500 Ba1/BB+ 105.15 5.62% 66 4.43 UW UW Sino-Ocean Group 4.63% 30-Jul-19 500 Baa3/NR 102.58 3.17% 142 1.75 OW OW Sino-Ocean Group 4.45% 4-Feb-20 700 Baa3/NR 102.74 3.23% 142 2.22 OW OW Sino-Ocean Group 6.00% 30

29、-Jul-24 700 Baa3/NR 111.15 4.11% 197 5.62 N N Vanke 2.63% 13-Mar-18 800 Baa2/BBB 100.08 2.46% 102 0.46 N N Vanke 3.95% 23-Dec-19 600 Baa2/BBB 102.41 2.83% 103 2.12 N N Yuexiu Property 4.50% 24-Jan-23 500 Baa3/- 102.88 3.90% 191 4.68 N UW Source: J.P.Morgan estimates, Bloomberg (Data as on 21 Sep 201

30、7) Table 2: China property BB credits -Summary of recommendations Recommendation Issuer Coupon Maturity O/S Amt (US$M) Rating Offer price YTM(%) Z-spd (bp) Duration Current Previous Agile 9.00% 21-May-20 500 B1/B+ 108.25 5.60% 154 2.30 N UW Agile 5.13% 14-Aug-22 200 B1/B+ 103.75 4.27% 237 4.28 N - A

31、gile 8.25% 29-Jan-49 700 -/- 103.60 8.95% 223 0.78 UW N CIFI 7.75% 5-Jun-20 400 B1/B+ 107.00 4.94% 189 2.38 N N CIFI 5.50% 23-Jan-22 285 -/B+ 103.00 4.72% 282 3.79 UW UW CIFI 5.38% Perps 300 B1/- 100.25 8.70% 338 4.25 UW - Country Garden 7.50% 9-Mar-20 900 Ba1/BB 105.88 4.93% 90 2.23 N N Country Gar

32、den 7.25% 4-Apr-21 750 Ba1/BB 103.88 6.01% 45 2.99 N N Country Garden 4.75% 25-Jul-22 700 Ba1/- 102.50 4.17% 225 4.26 N N Country Garden 7.50% 10-Jan-23 750 Ba1/BB 105.25 6.31% 103 4.29 UW N Country Garden 4.75% 28-Sep-23 650 Ba1/- 101.75 4.42% 239 5.07 N N Country Garden 5.63% 15-Dec-26 350 Ba1/- 1

33、06.25 4.78% 264 7.11 N UW Future Land 6.25% 12-Nov-17 250 B1/B+ 100.52 2.12% 58 0.13 N N Future Land 5.00% 16-Feb-20 350 -/B+ 102.00 4.11% 224 2.23 UW UW Greentown 5.88% 11-Aug-20 500 Ba3/B+ 104.88 4.06% 199 2.62 N N Greentown 5.25% Perps 450 Ba3/- 102.34 8.95% 261 2.58 N N Greentown 9.00% Perps 500

34、 -/- 106.71 12.62% 199 1.25 OW OW Greenland 4.38% 3-Jul-19 400 Ba2/BB 99.88 4.44% 276 1.67 N N Greenland 5.88% 3-Jul-24 600 Ba2/BB 102.25 5.47% 343 5.47 UW UW Guangzhou R 2) RMB5 billion MTN during the period; 3) trust arrangement for RMB1.3 billion at 6.7% by pledging its rental and management rece

35、ivable of an investment property in Changzhou; and 4) RMB1.3 billion unsecured trust at 6-7% for bridging the land acquisition in Shenzhen. Total funding cost lowered to 5.7% from 5.4% a year ago. Sufficient liquidity. Unrestricted cash balance ended 49%yoy higher to close to RMB18 billion. Total de

36、bt/EBITDA deteriorated to 9.2x from 6.6x a year ago. Net debt/EBITDA was marginally high at 5.8x, up from 4x in 1H16. We believe higher leverage is a result of the companys early payments of its land premium. Management is also working on extending the maturities of its onshore bonds by providing 20

37、-50bps additional yield for bondholders to waive the put option. Negative cash outflow on almost fully paid land premium. Contracted sales increased by 75%yoy to RMB49 billion on growth on both GFA sold and ASP. It acquired 51 land plots for attributable RMB26 billion, of which only RMB2 billion rem

38、ained outstanding. Overall outflow was around RMB1.1 billion in 1H17 after paying RMB25 billion of land premium and RMB14 billion of construction cost. EGM for privatization on October 17. Future Land announced that it would hold an EGM to vote on the privatization plan on October 17 after a court m

39、eeting on the agenda. The developer proposed to privatize the listco in Hong Kong at HK$3.3/share. It appears the market is valuing Future Lands share price at a much higher level given that its share price closed at HK$4.4 on September 22, 33% higher than the proposed privatization price. The devel

40、oper needs to raise its offer price to increase the likelihood of a successful privatization. Moodys: Ba3 Outlook: Positive S and 2) restrained land acquisitions of around RMB16 billion only. Supports from CCCG. We continue to take comfort from CCCGs 29% ownership and management control as well as c

41、onsolidation of Greentowns accounts. The developer managed to raise US$450 million perps at 5.25% with letter of support from CCCG. Key risks. Downside risk to our call would be on the execution risk of its expansion plan over the medium term. Upside risk of our Neutral call on the rest of the curve

42、 could come up from early redemption but largely priced in. Moodys: Ba3 Outlook: Negative S and 2) the rating agencys expectation of improving credit metrics, as measured by revenue/adjusted debt to 55-65% (1H17: 46% LTM; 2016: 32%) and EBIT/interest coverage to 2.5-29x (1H17: 2x LTM) over the next

43、12-18 months, Moodys: B2 Outlook: Positive Ss:NR S and (2) no part of any of the research analysts compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts liste

44、d on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention. Important Disclosures Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate

45、 is a market maker and/or liquidity provider in securities issued by Dalian Wanda, China Vanke. Market Maker/ Liquidity Provider (Hong Kong): J.P. Morgan Securities (Asia Pacific) Limited and/or J.P. Morgan Broking (Hong Kong) Limited and/or an affiliate is a market maker and/or liquidity provider i

46、n the securities of China Evergrande Group, Sunac, Guangzhou R Neutral (over the next three months, the recommended risk position is expected to perform in line with the relevant index, sector, or benchmark); and Underweight (over the next three months, the recommended risk position is expected to u

47、nderperform the relevant index, sector, or benchmark). J.P. Morgan Emerging Markets Sovereign Research uses Marketweight, which is equivalent to Neutral. NR is Not Rated. In this case, J.P. Morgan has removed the rating for this particular security or issuer because of either a lack of a sufficient

48、fundamental basis or for legal, regulatory or policy reasons. The previous rating no longer should be relied upon. An NR designation is not a recommendation or a rating. NC is Not Covered. An NC designation is not a rating or a recommendation. For CDS, we use the following rating system: Long Risk (

49、over the next three months, the credit return on the recommended position is expected to exceed the relevant index, sector or benchmark); Neutral (over the next three months, the credit return on the recommended position is expected to match the relevant index, sector or benchmark); and Short Risk (over the next three months, the credit return on the recommended position is expected to underperform the relevant index, sector or