􀀗 Physical market to remain challenging against
the backdrop of administrative measures, despite
broader monetary easing
􀀗 Divergent cost of capital will be a key
differentiator in 2012, in addition to execution
􀀗 Conviction calls on COLI, Longfor and CRL
Physical environment to remain challenging in 2012 despite signs of
monetary easing. Sector-specific administrative measures will continue
to rein in demand. We expect additional price cuts in early 2012 as
developers strive to maintain a decent sell-through rate. Hence we
advocate an investment focus on factors beyond the policy uncertainties.
Developers face increasingly divergent cost of debt financing, leading
to a wide range of cost of capital. Access to debt financing will depend
on a developer’s funding maturity profile, operational capability and
balance sheet strength. This will be a key differentiator as developers
move to a lower-margin and quick asset turn model.
Earnings and NAV estimate revisions are driven by changes in
assumptions for property price, contract sales and cost of debt. We
forecast residential prices to decline 20% in tier-1 cities and 10% in all
others. We expect lower contract sales in 2012-13 as a result. Increasing
differential in cost of debt will have a disproportionate impact on earnings.
We favour developers with superior execution, proven platform and
cost of capital advantage. These are the key factors underpinning our
conviction calls on COLI and Longfor, both of which have low cost of
capital and highest earnings visibility within their own SOE/non-SOE
peer group. We also favour CRL as it has improved its asset turn and has
good access to funding, while further asset injection risk has been
reduced. From a valuation perspective, we favour KWG given the large
discount to the liquidation value and its still manageable liquidity.

目录
Looking beyond the policy
conundrum 6
Cost of capital under the limelight 12
Earnings and NAV estimate
revisions 16
Downside protection –
theoretical liquidation value 23
Assessing the cash flow buffer 26
Be realistic on policy expectations 32
Key property market data 39
Company write-ups 51
Agile (3383 HK) 52
China Overseas Land (688 HK) 54
China Resources Land (1109 HK) 56
Franshion (817 HK) 58
Guangzhou R&F (2777 HK) 60
KWG Property (1813 HK) 62
Longfor (960 HK) 64
Shimao (813 HK) 66
Shui On Land (272 HK) 68
SOHO China (410 HK) 70
Yanlord Land (YLLG SP) 72
Disclosure appendix 74
Disclaimer 77