On February 19, the Research Report issued by Guoyuan International indicates Kaisa Group (1638.HK) having achieved performance of rapid growth, quality land reserves, ample monetary value, and potential renovation projects that will strongly support its corporate sales growth and improvement of profitability, for which Kaisa target price was raised to HKD4.50 and maintained “Buy” rating.
High Certainty of Sales Growth
The Research Report indicates that in 2019, Kaisa Group has accumulatively realized equity contracts amount to RMB88.12 billion, 25.8% year-on-year growth, accomplished annual sales target; sold floor area was 4.642 million square meters, 21% year-on-year growth; average contract selling price was raised to RMB18,983 per square meter, 4% year-on-year increase; that Kaisa has maintained rapid growth both in contractual sales amount and floor area, with continuous improvement in total amount.
According to the Research Report that by the end of June 2019, Kaisa had total land reserves building area of 26.00 million square meters, worth of total value of about RMB500.0 billion, of which monetary value in the Greater Bay Area was about RMB345.3 billion, representing up to 68.9% of total value; monetary value in Shenzhen Municipality was about RMB162.4 billion, representing 32.4% of total value; Kaisa has quality land reserves and ample monetary value, leading to high certainty of sales growth. From its regional layout, Kaisa has become a major beneficiary from “construction of Guangdong-Hong Kong-Macao Greater Bay Area” and “Building Shenzhen into a Demonstration Pilot Zone”.
Maintained “Buy” Rating
Kaisa has continuously promoted renovation projects, which account for 22% of current land reserves and worth of near RMB200.0 billion in monetary value. In addition, it has a total of 128 unrecorded renovation projects, including land area exceeding 32.00 million square meters, with estimated value of near RMB2 trillion, of which 100% projects are located in the Greater Bay Area; it’s expected that 0.80-1.00 million square meters land will be supplied per year for renovation, which will bring considerable transformation from renovation value, so as to ensure its sales growth and improvement of profitability.
The Research Report indicates that Kaisa, by focusing its business on the development of the Greater Bay Area and taking root in Shenzhen, has realized rapid growth in performance in recent years, made quality land reserves, created ample monetary value, and planned for potential renovation projects that will strongly support its corporate sales growth and improvement of profitability. For these reasons, Guoyuan International can expect that Kaisa will achieve 0.57 and 0.74 EPS in 2019 and 2020, respectively, raise its target price to HKD4.50 and maintain its “Buy” rating.
