Guide to this report:
As a pioneer of green real estate in China, through more than ten years of accumulation, Landsea has remarkable technical patents and brand advantages. We are optimistic about its high growth potential in the asset-light model in the post-real estate cycle era.
Summary:
The initial coverage gave an increase in holdings; the target price was HK$0.93, which is 32% more than the current price. The company's core EPS is predicted to be 0.14, 0.22, and 0.30 yuan in 2015/16/17, an increase of 41%, 74%, and 35% over the same period last year. The company has been deeply involved in green tech housing for more than ten years, and will fully benefit from the upgrading of real estate consumption and the rapid growth of the green tech real estate market segment. The company has announced that it has signed a memorandum of understanding with the controlling shareholder on asset injection matters, which may be favored in terms of capital in the short term. We are optimistic about the contribution of the company's asset-light business to profits in the medium to long term, and the value is expected to be revalued. Therefore, a target price of HK$0.93 was given, corresponding to a 45% discount on NAV and 5.8 times PE in 2015.
Deeply involved in the green technology real estate market segment, the asset-light business is a monetization of the company's accumulated technology and brand strength in the past. Landsea Group has long implemented a differentiated green technology development strategy and built a unique and leading green building technology platform, including technology and R&D, design institutes, decoration and property management. The Group has 147 patents in the field of construction technology, covering all areas of HVAC, enclosure, civil construction and control. “Langshi” has accumulated a good reputation in the Yangtze River Delta region, and the real estate premium rate can reach 15-20%. Since 2014, the company has implemented an asset-light strategy and achieved new profit growth points through cooperative development, small share trading, and commissioned development models.
Based on the Yangtze River Delta, it concentrates mainstream cities and expands the world's strategic layout. Landsea Group's business is mainly concentrated in the Yangtze River Delta region. As of May 2015, Landsea Group has developed a total of 51 properties in many Tier 1 and 2 cities across the country, with a total development area of about 9.07 million square meters. The company also has a global layout, developing 1 and 4 projects in Germany and the US, respectively. As the only listing platform under Landsea Group, the company has received strong support from the parent company, including various models such as profit injection, shareholder loans, brand sharing, technical support, and asset injection.
The valuation is underestimated, and the margin of safety is high. We forecast the company's NAV to be HK$1.68, a 58% discount compared to the current price, with a high margin of safety. The current valuation is relatively underestimated given the company's high-growth space to expand by relying on technology and brand advantages. The gradual implementation of asset-light business in the later stages is expected to open up room for upward valuation.
Catalysts: Parent company asset injection has entered a substantial stage; green building policies are favorable.
Risk Warning: Policy regulation risks; there is uncertainty about technology output.