Company Reports

We are dropping coverage of Poly Developments. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Poly Developments and Holdings’ preliminary full-year 2020 revenue and attributable earnings of CNY 245 billion and CNY 28.7 billion, respectively, fell short of street expectation. The top line was 12% below our estimate, while earnings were 5% below. The top line shortfall was buffeted by the steady margin, which remained at the high level seen in 2019. Compared with a year ago, the top line and earnings were both up 4% year on year, unchanged from the pace seen during the third quarter. Given the limited share price reaction despite the miss, we think investors are looking forward to the recovery. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company. The shares are fairly valued.

Poly Developments and Holdings reported year-to-September revenue and earnings of CNY 117 billion and CNY 13.2 billion, up 5% and 3% year on year, respectively. The market was disappointed with the weak earnings growth, but it was in line with our projection. Net gearing remained high despite good contract sales during the third quarter.

Poly Development reported first-half results with revenue and attributable earnings of CNY 73.7 billion and CNY 10.1 billion, respectively. The top line was up 3.6% compared with the same period a year ago, and earnings were up 1.7%. This is largely unchanged from the preliminary results released in late July. Operating margin and net margin were slightly higher than our projection, though the top line only accounted for one fourth of the full-year projection. On the other hand, weak contract sales to date have resulted in a stretched balanced sheet. We maintain our CNY 16 fair value estimate and no-moat rating.

Poly Developments and Holdings Group reported preliminary first-half results with revenue and attributable earnings of CNY 73.7 billion and CNY 9.8 billion, respectively. The top line was up 3.6% compared with the same period a year ago, and earnings were up 1.7%. Both achieved operating margin and net margin slightly higher than our projection, though top line only accounted for a quarter of the full year projection. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company.

Poly Developments and Holdings Group reported first-quarter revenue and earnings of CNY 23.8 billion and CNY 2.4 billion, respectively. The top line and earnings were up 6% and 3% year on year. First-quarter results accounted for 8% of our full-year revenue and earnings estimates, in line with the run rate seen a year ago. However, slow contract sales during the quarter pushed net gearing up to 71%, highlighting the balance sheet risk the company has struggled with. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company. The shares are fully valued at this point.

Poly Developments and Holdings Group released full-year results with revenue and earnings of CNY 236 billion and CNY 27.9 billion. The earnings were slightly better than the preliminary results announced in January, up nearly 50% year on year. Relative to our initial projection, full-year results ended with top line 11% below, but earnings were in line, on the account of much improved margin for the year. Full-year dividend was CNY 0.82 per share, up 64% from a year ago. As of year-end, the company has over 600 projects with a land bank of 211 million square meters, slowing from the strong expansion in operational scale seen during the past two years. As a result, the balance sheet strengthened substantially. We expect the company to enter a period of slower growth ahead. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company. The shares currently appear fairly valued.

As the Chinese property market enters a consolidation phase, large developers will be the main beneficiaries as smaller players and nonspecialist firms are pushed out of a market characterized by greater pricing pressure and less funding liquidity. Changing demographics will lead to slower urbanization and lower fixed-asset investments, and the capital market will see tighter liquidity as the central government seeks to deleverage gradually. In our view, the buoyant property market and the accommodative policy environment are mostly in the past.

Major Chinese property developers under our coverage mostly showed declining sales in January compared with a year ago. The coronavirus situation has exerted considerable impact. The decline was also partially attributed to the timing of the lunar new year, falling on end of January this year, compared with early February a year ago. On the positive side, the first quarter of the year is generally a light period in terms of property sales. The residential property market in China tends to be weighted toward the second half of the year, with the first quarter contributing 15% and the first half contributing 40% over the past decade or so. Further, home purchase, as a big-ticket expenditure, is not subject to frequent or impulse buying. Hence, if a planned purchase is deferred, the purchase is likely to be consummated at a later time, pointing to a strong rebound for the property market ahead as the virus situation passes. We maintain our fair value estimates and moat ratings for Chinese property developers under our coverage.

Poly Developments and Holdings reported preliminary full-year 2019 results with revenue and earnings of CNY 236 billion and CNY 25.7 billion, respectively. The top line was 11% below our estimate, while attributable earnings were 2% below, on the account of an improved margin for the year. Compared with a year ago, the top line was up 21% year on year, while earnings were up 42%, unchanged from the pace seen during the third quarter. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company. The shares currently appear fairly valued.

As the Chinese property market enters a consolidation phase, large developers will be the main beneficiaries as smaller players and nonspecialist firms are pushed out of a market characterized by greater pricing pressure and less funding liquidity. Changing demographics will lead to slower urbanization and lower fixed-asset investments, and the capital market will see tighter liquidity as the central government seeks to deleverage gradually. In our view, the buoyant property market and the accommodative policy environment are mostly in the past.

Poly Developments and Holdings successfully listed its property management business, Poly Property Development. The entity issued 133 million shares or 25% of its equity at HKD 35.10 per share, raising HKD 4.7 billion. The shares began trading on Dec. 19 and ended the day at HKD 44.50, up nearly 30%. Based on projected full-year earnings for 2019, the shares are trading at 26 times earnings based on the placing price and at 34 times earnings based on the closing price.

Poly Developments and Holdings reported year-to-September revenue and earnings of CNY 112 billion and CNY 12.8 billion, respectively. The top line was up 18% year on year, while earnings were up 34%. This strong growth in earnings was due to the still high margin, along with a smaller share of minority interest as the company undertook fewer joint ventures during the year. Slower contract sales and active land banking had pushed gearing higher during the period. We maintain our fair value estimate of CNY 16, along with our no-moat rating for the company. While the shares are fairly valued currently, the pending listing of the property management business could be a catalyst. The proposal received China Securities Regulatory Commission approval in mid-September, and is currently pending approvals from the SFC and Hong Kong Exchanges and Clearing. The property management business accounts for 1% of the company’s earnings, but a separately listed entity will likely trade at 20 to 30 times of the earnings versus 6 to 8 times for the parent.

Poly Development reported first-half results with revenue and attributable earnings of CNY 71 billion and CNY 9.7 billion, respectively. The top line was up 19% compared with the same period a year ago, and earnings were up 51%. The earnings growth was attributed to a higher margin and a smaller proportion of minority interest. We raised our margin assumption, resulting in earnings higher by 7% and 3% in 2019 and 2020. We increase our fair value estimate to CNY 16 from CNY 15, along with our no-moat rating for the company. We believe the shares are now fairly valued at this point as we require a greater margin of safety given the company's business volatility.

As the Chinese property market enters a consolidation phase, large developers will be the main beneficiaries as smaller players and nonspecialist firms are pushed out of a market characterized by greater pricing pressure and less funding liquidity. Changing demographics will lead to slower urbanization and lower fixed-asset investments, and the capital market will see tighter liquidity as the central government seeks to deleverage gradually. In our view, the buoyant property market and the accommodative policy environment are mostly in the past.

Poly Developments and Holdings Group reported first-quarter revenue and earnings of CNY 22.6 billion and CNY 2.3 billion, respectively. The top line and earnings were up 12% and 23% year on year. The strong earnings growth was mainly due to lower operating expenses. Net gearing was lower for the quarter, reflecting the deleveraging trend seen over the past two years. First-quarter results accounted for 9% and 10% of our full-year revenue and earnings estimates, in line with the run rate seen a year ago. We maintain our fair value estimate of CNY 15, along with our no-moat rating for the company.

As the Chinese property market enters a consolidation phase, large developers will be the main beneficiaries as smaller players and nonspecialist firms are pushed out of a market characterized by greater pricing pressure and less funding liquidity. Changing demographics will lead to slower urbanization and lower fixed-asset investments, and the capital market will see tighter liquidity as the central government seeks to deleverage gradually. In our view, the buoyant property market and the accommodative policy environment are mostly in the past.

Poly Developments and Holdings Group, or Poly Group released full-year results with revenue and earnings of CNY 195 billion and CNY 18.9 billion, slightly better than the preliminary results announced in January. Relative to our initial projection, full-year results ended with top line 2% below, but earnings 1% higher, owing to better margin and higher contributions from associates. Full-year dividend was CNY 0.50 per share, up 25% from a year ago. As of year-end, the company has over 600 projects with a land bank of 195 million square meters, continuing the growth in operational scale seen during the past two years. Part of the growth was driven by higher number of joint ventures. Along with modest land bank acquisitions, balance sheet was slightly strengthened with lower gearing.

As the Chinese property market enters a consolidation phase, large developers will be the main beneficiaries as smaller players and nonspecialist firms are pushed out of a market characterized by greater pricing pressure and less funding liquidity. Changing demographics will lead to slower urbanization and lower fixed-asset investments, and the capital market will see tighter liquidity as the central government seeks to deleverage gradually. In our view, the buoyant property market and the accommodative policy environment are mostly in the past.

Poly Developments and Holdings reported preliminary full-year 2018 results with revenue and earnings of CNY 194 billion and CNY 18.1 billion, respectively. The top line is 2% below while earnings are 3% below our estimate. Compared with a year ago, the top line was up 32% year on year, while earnings were up 17%, unchanged from the trend seen during the third quarter. The lower growth in earnings was probably due to a bigger share of minority interest as the company undertook more joint ventures during the year to scale up its operation. We maintain our fair value estimate of CNY 13 along with our no-moat rating.