1Q14 contracted sales reached HK$35.128bn, locking-in 25% of FY14 target。

For Mar, COLI has contracted sales of HK$10.81bn with contracted GFA of587,200sqm and contracted ASP of HK$18,404psm. In 1Q14, COLI hascontracted sales of HK$35.13bn, locking-in 25% of FY14 target of HK$140bn.

Contracted GFA sold in 1Q14 amounted to 1.95msqm. In addition, at end-Mar,COLI had subscription sales of HK$7.14bn, which are expected to transforminto contracted sales in the following month. Contracted sales value was up by19% MoM while contracted GFA was up 3% MoM. Contracted ASP saw amarked increase of 16% MoM and 22% YoY to HK$18,404psm in Mar-14.

Southern region was the largest contributor to 1Q14 sales, recordingHK$7.85bn contracted sales and 398.6ksqm in contracted GFA sold,representing 22% and 20% of the 1Q14 total contracted sales value and GFA,respectively. Eastern and northern regions closely followed, recordingHK$6.24bn and HK$6.10bn contracted sales, respectively, to 18% and 17% ofthe total 1Q14 contracted sales. In terms of contracted GFA, southern andeastern made up 20% and 18% of the total contracted GFA, respectively.

2 pieces of new land acquired in Mar。

In Mar 2013, COLI acquired 2 pieces of new landbank, both sites are inWanbailin District in Taiyuan. The two projects are 95% and 50% owned byCOLI, respectively and total attributable GFA is 858ksqm. The total landpremium payable was RMB1.85bn, and the average land cost was only aboutRMB2,161psm. In our view, the low land costs reflect COLI's strong ability toacquire new landbank in good urban location at reasonable land prices, whichshould support consistent high margins for COLI.

Convincing valuations at 41% NAV discount, 6.7x 2014E P/E and 1.3x P/B。

Our target price of HK$32.03 is based on a 10% discount to our estimated NAVof HK$35.59. In addition, our NAV reflects 3-5% ASP declines in Tier-1 andTier-2 cities in 2014. Despite these, COLI now trades at an NAV discount, PEand PB that are all close to or lower than ‘-1SD’ level of historical ranges. Withhigh visibility for solid earnings growth in 2014-16, COLI's valuations lookattractive, and with the expected stronger parent support, we see high upsidepotential to NAV and earnings. Risks: new tightening measures, weaker salesand unexpected economic volatility.

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