by winston » Thu Jun 26, 2014 8:28 am
not vested
Following the successful new H share listing, we raise 12-month NAV-based TP to HK$20.2 (vs. HK$17.7 previously for Vanke B), implying 52% potential upside from the last close.
Retain Buy on Vanke H and raise TP, post successful H share listing
・ We update Vanke H’s valuation by using our offshore coverage universe as a broad comparison base and COLI (0688.HK, Neutral, HK$18.88) as a direct comparable.
・ We keep our end-14E NAV (HK$25.3) and 14E/15E/16E underlying EPS unchanged at Rmb1.81/2.18/2.34 but we are narrowing our TP discount to 20% from 30% for Vanke H by using COLI as a comparable.
・ We have a clear preference for Vanke H vs. COLI, as Vanke H trades at a valuation discount to COLI and offers a higher dividend yield. Our 12-month NAV-based TP of Rmb12.10 for Vanke A is unchanged.
Strong sales performance; proven ability as industry consolidator
・ We expect Vanke’s stronger than peers’ sales performance to continue. In the first 5 months, Vanke achieved 41% of its 2014E contract sales target vs. sector average 31%;
・ We expect Vanke to take most advantage of the likely acceleration of industry consolidation. In previous downturns, Vanke has demonstrated its ability to expand market share.
Narrower TP discount to NAV justified; Buy Vanke H/A
・ Our TP NAV discount of 20% for Vanke H is larger than the 10% discount we apply for COLI for two main reasons:
1) We cross-check our TP implied P/B which indicates 1.9X/1.6X 2014E/2015E P/B for Vanke vs. COLI’s 1.8X/1.6X. We expect higher ROE for Vanke in the near term (partly due to higher unbooked sales to be recognized in recent years) which justifies a higher TP implied P/B. Longer term, we expect the ROE trend for the two companies to converge.
・ We reiterate our Buy rating on Vanke H/A (Vanke A is on the Conviction List).
Source: GS
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