WevisitedvariousprojectsinShenzhendevelopedbyCOLI,CRLand,KaisaandVankelastFriday.Generally,theShenzhenpropertymarketwasstrongin2013withoverallASPrisingby20%YoYYTD.Moreover,ASPinBao’andistrictsawevenhighergrowthonproximitytoQianhai.AsASPgrowthYTDisalreadyabovetheunderlyingdisposalincomegrowth,weexpectthelocalgovernmenttostrictlyenforceadministrativemeasuresinthecomingmonthsinordertocontainfurtherpricegrowth.ApartfromthestrongASP,weseeShenzhen’smarketasbeinghealthy,withinventorycurrentlyateighttoninemonths,anddevelopersabletoachieveasell-throughrateofabout60-70%.
KaisaCityPlaza:akeycontractedsalescontributortoKaisain1H13
AkeyhighlightofourShenzhentourwasKaisa’sKaisaCityPlaza,thefirstmajorredevelopmentprojectthatKaisaundertook.TheprojectwasfirstlaunchedforsaleinDecember2012andachievedsalesofRmb800monthefirsttwodaysoflaunch.Moreover,theprojectcontributedabout25%ofKaisa’scontractedsalesin1H13withanestimatedgrossmargininexcessof50%.KaisaiscurrentlyplanningtolaunchPhase2oftheproject(totalof3,100unitsoverninetowers)intheupcomingDecemberatASPofRmb25,000/sqm.
CRLand’sDaChongVillageexpectedtolaunchforsalenolaterthanOct-14
TheDaChongVillageprojectiscurrentlyheldattheparentcompanylevel(CRGroup)andisexpectedtobeinjectedintoCRLandinduecourse.Accordingtomanagement,totallandcost(takingintoeffecttheconstructioncostforrelocationhousing)fortheprojectisaboutRmb10,000/sqm.ResidentialGFAavailableforsaleisaround900,000sqmGFA(tobedevelopedinfivephases)andcommercial(office/retail)GFAisaround400,000sqmGFA.ThegroupisexpectedtolaunchthefirstphaseoftheresidentialportionforsalenolaterthanOctober2014,withanindicativeASPofaroundRmb40,000/sqm.
COLI’sResidenceNineiswithincloseproximitytoQianhai
TheResidenceNineprojectisabouttenminutes’drivingdistancefromtheQianhaidevelopmentarea.TheprojecthasatotaldevelopmentGFAofabout180,000sqm,comprisingmainlytownhousesandasmallnumberofapartmentunits.Phase1oftheprojecthasabout200townhouses(plotratioof0.7x),rangingfrom201sqmto250sqminsizeoverfivelevels(inclusiveofabasementlevel).IndicativeASPpricingforPhase1rangesfromRmb55,000-65,000/sqm.Theprojectisexpectedtoofficiallylaunchforsaleshortly.
Toppicks:COLI,COGO,CRLand,R&F,CountryGarden,KaisaWhilewehaveastructurallypositiveviewonlong-termpropertydemandin
China,therearesegmentalandgeographicaldifferencesthatunderpinourstockpreferences.Forresidential,ourtoppicksaredevelopersfocusedonend-users:COLI,COGO,CRLand,R&FandCountryGarden.Fornew-formurbanizationandsocialhousing,welikeKaisa,CCREandCSCI.Forexpectedgrowthindomesticconsumption,wepreferHangLungPropandWharf.
However,developerswithhighexposuretohigh-end,Tier-1/bigger-Tier-2cities–suchasSunac,SinoOcean,YanlordandAgile–shouldfacebiggerchallenges.Keyrisks:unexpectedeconomicvolatilityandchangesinpolicies.