报告名称：Evergrande Real Estate Group(03333.HK)Decretive expansion adds pressure to cash
报告类型：港股研究
报告日期：2015-12-30
研究机构：中金公司
股票名称：恒大地产
股票代码：03333
页数：6
简介：What's new
Evergrande (“EG”) announced it will to spend Rmb20.4bnto acquire five projects from New World Developmentand Chow Tai Fook. The company also simultaneouslyannounced the closing of US$1.5bn of perpetual securities (theconversion featured was removed while the coupon rate wasraised from 7% to 9%) subscribed by the above consortium.
Comments
Another aggressive land bank expansion. EG acquired6.65mn sqm unsold land bank, mostly in Chengdu (2.6mn sqm)and Guiyang (3.1mn sqm) in terms of GFA. The acquisition willadd Rmb62bn to its future saleable resources, 29%/28%/24%/11%/8% in Guiyang/Chengdu/Beijing/Shanghai/Qingdao. TheBeijing and Shanghai projects are in suburban areas, whileGuiyang and Qingdao are becoming over-supplied. The GPM ofthese projects are in the 24~32% range.
A decretive deal adding pressure to future cash flow. Thetotal consideration implies a 12% premium to our estimated GAVof Rmb18.2bn, or a 4% premium based on a present value ofRmb18.9bn if we factor in the payment structure. Enough,although the immediate cash outlay would be Rmb5.2bn, helpedby installment payments and the issuance of US$1.5bn perps,this acquisition would further add to the cash flow uncertaintyand debt-serving obligations. As a reference, all the acquisitionsEG made in November~December alone would require paymentsof Rmb15bn in 2016 and Rmb10bn in 2017.
Valuation and recommendation
Revise up 2016e EPS by 12% to Rmb0.61.sh, after 11%share repurchase. Cut TP by 3% to HK$3.86, because NAV isdown 3% to HK$7.71/sh after the decretive deal and repurchase.Current valuation of 14% NAV discount and 9.1x 2016e P/E isrisky, considering EG’s demanding leverage, stretching futurecash flow and aggressive expansion. Maintain SELL.
Risks
2016 physical market much stronger than expected.

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