On November 19, the Research Report on Kaisa Group issued by Haitong Securities claimed that due to its deeply plowing the Greater Bay Area and high potential of renovation projects, Kaisa was granted “Market Outperform” rating.
The basis of such judgment by Haitong Securities is that Kaisa has adapted itself to industrial development in the Greater Bay Area and proactively and deeply laid out its urban operation industry chain, to facilitate coordinated development of new business and main business; that Kaisa has premium and ample land reserves for renovations, strong value potential, accelerated release of monetary value supports its performance growth; as well as its recovery of profitability and substantially improved debt portfolio.
Strong contractual sales and promising business growth are solid foundation for Kaisa continuously moving toward new steps. In recent years, Kaisa has maintained high growth rate in contractual sales. In 2018 and the first half of 2019, Kaisa has realized property sales of RMB70.059 billion and RMB34.690 billion, respectively, and 56.7% and 37.0% year-on-year growth, respectively.
The Report indicates that Kaisa has premium and ample land reserves, by the first half of 2019, its land reserves were up to 25.80 million square meters, total value of land reserves was more than RMB 500.0 billion, of which those of core cities in the Greater Bay Area representing 69%; in the first half of 2019, Kaisa has increased about 2.46 million square meters of equity building area of land reserves , of which 60% projects were located in the Greater Bay Area; looking forward the second half of 2019, it’s expected that sellable value of Kaisa will reach about RMB120.0 billion, of which those of core cities in the Greater Bay Area representing 61%; given sellable value and marketing rhythm of Kaisa, Haitong Securities believes that Kaisa will undoubtedly accomplish its full-year sales target.
Meanwhile, Haitong Securities highly affirms the advantages of Kaisa in urban renewal in the Greater Bay Area, and points out that these projects having strong potential will facilitate Kaisa in performance growth.
“Kaisa is experienced in renovations, its projects focus on core cities in the Greater Bay Area, most of which are positioned as multiple-format composite types. By speeding up supply of land and goods for renovation projects, it’s expected that Kaisa will realize successive land supply for 6 renovation projects worth of RMB73.6 billion in this full year. In the second half of 2019, Kaisa accelerated marketing of properties and goods for its 5 renovation projects, together with renovation projects on sale, it’s expected that sellable value of renovation projects in the second half of 2019 will represent 31% total value. Moreover, by the end of the first half of 2019, its 32.00 million square meters of unrecorded land reserves for renovation have strong potential, all projects are located in the Greater Bay Area, worth of about RMB2 trillion. We can believe that premium land reserves with strong potential and accelerated release of project values can support performance growth of Kaisa.”
In addition to developing its main business, Kaisa also has deeply laid out its diversified industry in the Greater Bay Area, to support sustainable corporate development. Kaisa focuses on real estate as main business, and lays out diverse business in the Greater Bay Area, involving mass culture & sports, mass health, mass technology, hospitality & catering sectors etc., and aligns with the development direction of future industries in the Greater Bay Area. According to the Report issued by Haitong Securities, Kaisa has realized revenues in diverse business sectors of property sales, property investment, property management, hospitality & catering, theaters, department stores and cultural centers, waterway passenger and freight transportation services etc.
In addition to intensive development of renovations and diverse businesses, Kaisa keeps improving its internal strength. Haitong Securities believes that Kaisa has steady financial performance and substantially improved its financial condition.
The Report indicates that in the first half of 2019, Kaisa has realized a net profit of RMB2.837 billion attributable to the owners of the parent company, 66.50% year-on-year increase; that in the first half of 2019, Kaisa has slightly rebounded gross margin and net margin from major business, 33.36% and 14.11%, respectively; most sectors of its main business have realized high growth rate.
Haitong Securities points out that Kaisa has continuously improved its debt level, its debt-to-asset ratio was decreased to 82.67% in the first half of 2019; its short-term solvency remained stable; in the first half of 2019, liquidity ratio and quick ratio of Kaisa were 1.57 times and 0.84 time, respectively.
“Considering accelerated release of renovation projects in the Greater Bay Area and continuously improved financial condition, Kaisa has high growth and rated ‘Outperform’.”
