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1、Disclaimer we apply our proprietary analysis to identify those with the weakest outlook We call those cities ravens; the companies we cover have only minimal exposure to them EQUITIES CHINA August 2017 By: Michelle Kwok 1 EQUITIES CHINA August 2017 Figure 1: Cumulative ASP performance of cities in C
2、hina, 2012-2016 Note: Showing 95 cities in which we track property sales data. Source: CREIS, HSBC 2 EQUITIES CHINA August 2017 Figure 2: Recap of our 20 phoenix cities (see our report Catching phoenixes, dated 5 June 2017) Note: “JS” stands for the Jiangsu province to avoid confusion with another S
3、uzhou city in Anhui (AH). Source: CREIS, HSBC 3 EQUITIES CHINA August 2017 Executive summary 4 Chinas twenty least attractive cities 9 Raven cities vs ghost cities 12 Revisiting migration-driven housing demand 14 Reality check on supply 24 Valuation perspective 26 Appendix 37 Disclosure appendix 49
4、Disclaimer 52 Contents EQUITIES CHINA August 2017 4 The 20 cities in China with the weakest migration drivers In June we published a report (China Real Estate: Catching phoenixes, 5 June 2017) featuring the 20 cities in China that we believe are set to lead a new phase of home price growth in China
5、as migration-driven demand spills over from the countrys big metropolises. In this report, we go to the opposite end of the city league and identify for investors those 20 cities that are likely to underperform in terms of future home prices. These cities lack the characteristics of the top 20, whic
6、h means job prospects at the bottom end are not strong and access to quality primary schools is relatively limited. This in turn implies relatively weaker immigration opportunities and hence subdued future home price growth. We called the top 20 phoenix cities because in Chinese mythology that bird
7、symbolises prosperity and new beginnings. In this report we identify the bottom 20 cities with the least home price growth prospects as ravens which is a bird that is generally associated with impending bad news in folklore and mythology. Executive summary We revisit our propriety analysis of the mi
8、gration-driven home price growth prospects of Chinas cities Having identified those cities that are the most likely to benefit from migration, we now point to those most likely to underperform Our coverage universe has minimal land bank exposure to those cities Phoenix cities are about promised pros
9、perity; raven ones are about bad omens Voting starts 6th July If you value our service and insight, vote for HSBC Click here to vote VoteinAsiamoneyBrokersPoll2017 5 EQUITIES CHINA August 2017 Figure 3: The 20 raven cities in China Source: CREIS, HSBC EQUITIES CHINA August 2017 6 EQUITIES CHINA Augu
10、st 2017 Our coverage universe has insignificant exposure to the raven cities We are not, of course, positing a simple causal connection between the performance outlook for companies that are exposed to phoenix cities and those that have some exposure to raven cities. There are plenty of company-spec
11、ific issues that would need to be taken into account. As it happens, stocks under our coverage universe have less than 11% of their land bank (in terms of gross floor area, or GFA) located in the raven cities, a relatively small portion. In fact, four namely China Jinmao, Longfor, Shui On Land and Y
12、anlord have zero exposure. All but one are Buy rated (we have a Hold rating on Shui On Land, due to its high leverage and risks associated with execution outside Shanghai). Four stocks with no exposure to the raven cities (refer to page 26 for investment theses): 1. Longfor (960 HK, Buy, HKD19.20, T
13、P HKD20.30) 2. China Jinmao (817 HK, Buy, HKD3.53, TP HKD4.00) 3. Yanlord (YLLG SP, Buy, SGD1.79, TP HKD2.00) 4. Shui On Land (272 HK, Hold, HKD1.87, TP HKD1.50) We have not made any changes to our earnings estimates, target prices and ratings in this report. Figure 4: Land bank exposure to raven ci
14、ties Source: Company data, HSBC 10.6% 8.9% 4.9% 4.7% 3.8% 2.6% 1.5% 0.4% 0.0% 0.0% 0.0% 0.0% 0%2%4%6%8%10%12% KWG CRL Sino Ocean COLI GZ R other company-specific factors and valuations must also be taken into consideration. In this respect, COLI, Longfor and Shimao are the standouts within our cover
15、age. COLI and Shimao are two of the three names within our coverage that have the most exposure to the phoenix cities, and both are trading at relatively attractive valuations as their share price performances have lagged YTD, which offers scope for catch-up. On the other hand, while Longfor has rel
16、atively low exposure to the phoenix cities, we should point out that the phoenixes account for c30% of its overall land bank, which we consider a decent level of exposure. In addition, we like Longfor on the basis that it has achieved one of the strongest contracted sales growth rates YTD, along with one of the strongest balance sheets among the privately owned enterp
