February contracted sales stronger-than-expected
Minimetals announced that it has achieved contracted sales of Rmb330mn in February, up 294% YoY; on the back of a 378% YoY increase in contracted GFA sold to 26ksqm. During the mo nth, Minmetals’ ASP recorded at Rmb12,692psm, down 17% YoY, due to changes in product mix. In 2M12, Minmetals has achieved contracted sales of approximately Rmb720mn (up 600% YoY), on the back of 61ksqm contracted GFA sold and achieving 14% of its full-year sales target of Rmb5bn so far already. In our view, as Minmetals is having a very strong start so far, this should be paving the way for it to beat its sales target in 2013 (following a 125% completion rate in 2012).
During the period, contracted ASP was at Rmb11,803psm, down 23% YoY.
Strong financial positions ensure flexibility in acquisitions With its strong balance sheet (net gearing at around 32-33% level, improving from 35.2% in 1H12), we believe Minmetals should have abundant financial flexibility to acquire more NAV and book value accretive projects in 2013. Aslo, being a state-owned developer, Minmet als is enjoying competitively lower interest and has better access to financ ing both offshore and onshore rates than most private developers, which should continue to serve as a key competitive advantage for Minmetals.
Benefiting from the government’s continued support of end-user demand We believe the latest share price pullbacks present good opportunities to pick up undervalued developers with strong sales momentum and/or improving balance sheets, such as Minmetals. Although recently there have been widespread press reports about various new tightening measures that would come out of and after the National NPC/PCC meetings, general policy direction will continue to support end-user demand, in our view. We continue to think new policy risks are not high for most cities in 1H13, given our ASP outlook. That said, we need to closely monitor ASP changes, especially in Tier-1 cities, as overly rapid price incr eases would likely attract comments/policy actions by government.
Valuations attractive: 63% NAV discount; 4.5x 2013E P/E and 0.5x P/B After the recent share price pullback, Minmetals is now trading at a 63% NAV discount, 4.5x 2013E P/E and 0.5x P/B – very attractive, in our view. As Minmetals continues to accelerate its sales and asset turnover, we expect to see a further narrowing of the stock’s NAV and P/B discounts. Our target price of HK$2.00 is based on a 40% NAV discount (in line with small-cap peers). With its strong financial positions and state-owned background, we also see good NAV upsides for Minmetals to come from new acquisitions. Risk: unexpected economic volatilit y and government tightening.
February contracted sales stronger-than-expected
Minimetals announced that it has achieved contracted sales of Rmb330mn in February, up 294% YoY; on the back of a 378% YoY increase in contracted GFA sold to 26ksqm. During the mo nth, Minmetals’ ASP recorded at Rmb12,692psm, down 17% YoY, due to changes in product mix. In 2M12, Minmetals has achieved contracted sales of approximately Rmb720mn (up 600% YoY), on the back of 61ksqm contracted GFA sold and achieving 14% of its full-year sales target of Rmb5bn so far already. In our view, as Minmetals is having a very strong start so far, this should be paving the way for it to beat its sales target in 2013 (following a 125% completion rate in 2012).
During the period, contracted ASP was at Rmb11,803psm, down 23% YoY.
Strong financial positions ensure flexibility in acquisitions With its strong balance sheet (net gearing at around 32-33% level, improving from 35.2% in 1H12), we believe Minmetals should have abundant financial flexibility to acquire more NAV and book value accretive projects in 2013. Aslo, being a state-owned developer, Minmet als is enjoying competitively lower interest and has better access to financ ing both offshore and onshore rates than most private developers, which should continue to serve as a key competitive advantage for Minmetals.
Benefiting from the government’s continued support of end-user demand We believe the latest share price pullbacks present good opportunities to pick up undervalued developers with strong sales momentum and/or improving balance sheets, such as Minmetals. Although recently there have been widespread press reports about various new tightening measures that would come out of and after the National NPC/PCC meetings, general policy direction will continue to support end-user demand, in our view. We continue to think new policy risks are not high for most cities in 1H13, given our ASP outlook. That said, we need to closely monitor ASP changes, especially in Tier-1 cities, as overly rapid price incr eases would likely attract comments/policy actions by government.
Valuations attractive: 63% NAV discount; 4.5x 2013E P/E and 0.5x P/B After the recent share price pullback, Minmetals is now trading at a 63% NAV discount, 4.5x 2013E P/E and 0.5x P/B – very attractive, in our view. As Minmetals continues to accelerate its sales and asset turnover, we expect to see a further narrowing of the stock’s NAV and P/B discounts. Our target price of HK$2.00 is based on a 40% NAV discount (in line with small-cap peers). With its strong financial positions and state-owned background, we also see good NAV upsides for Minmetals to come from new acquisitions. Risk: unexpected economic volatilit y and government tightening.
