and 66 Jardine s Bazaar, will greatly improve the Group s gearing. Financial Information

Transcription

1 Company Research Report Company Research Report Date Industry 2011/06/30 Property Closing Price Target Price HK$1.76 HK$3.00 Share Information Outstanding Shares (bn) 3.67 Market Cap (HK$bn) mth Avg Daily Turnover (HK$mn) mth High (HK$) mth Low (HK$) 1.32 BVPS (HK$) 4.19 P/E (x) 1.76 P/B (x) 0.41 ROA (%) 14 Total Debt/Total Assets (%) Div. Yield (%) 4.36 Price Performance Emperor International Holdings (163.HK) Overweight FY11 result review: Strong rental earnings to drive earnings in FY12-13 Results were better than our estimation: EIH s net profit saw 13% growth to HK$3.44bn. Revaluation surplus soared to HK$3.28bn, while profits from investment properties and hotel operations shot up 21% and 102% respectively. FY12 will be a year of lucrative harvest: EIH is set to reap over HK$1.5bn pre-tax profit from the completion of the Harbour One, the Java, and the Prince Place property development projects. The sale of investment properties, namely the Emperor International Square (EIS) and 66 Jardine s Bazaar, will greatly improve the Group s gearing. Risk concerns: i) interest rate uptrend may start late next year and, ii) property price may ease in coming years due to increase in land supply. Maintain Buy recommendation with target price of HK$3.00: EIH is currently trading at an extremely low prospective P/E of 1.58x. With the company set to realize handsome profits in FY12, we believe investors will begin to discover the hidden value of EIH. The current price implies a 65% discount to market NAV of about HK$5.00 per share, we believe a price target of HK$3.00 is achievable over the next 12 months. 1-mth 3-mth 6-mth 12-mth Change (%) Rel. to HSI (%) Financial Information Year Ended 31 March FY09 FY10 FY11 FY12E FY13E Revenue (HK$mn) 348 1,450 1,785 5,501 3,274 Growth (%) Net Profit (HK$mn) -1,537 3,059 3,445 4,084 2,697 Research Department Tel : (852) Fax : (852) esl.research@emperor.com.hk Growth (%) N/A N/A EPS (HK$) Growth (%) N/A N/A P/E (x) N/A DPS (HK cent)

2 FY11 result review EIH reported FY11 revenue of HK$1.78bn, up 23% YoY. Net profit came in at HK$3.44bn, up 13% YoY. Results were better than our estimation: EIH reported FY11 revenue of HK$1.78bn, up 23% YoY. Net profit came in at HK$3.45bn, up 13% YoY. EIH declared final DPS of HK$ Surge of rental income in FY11: Net rental income grew 21% to HK$393mn YoY, mainly attributed to positive rental reversion. Occupancy for retail and office remained high and stood at 99.2%, with yield rate around %. EIH s investment property portfolio was estimated at HK$18.9bn as of end- March We expect the Group s rental income will further increase to 441mn and 524mn in FY12 and FY13 respectively, driven by the addition of investment properties and continued positive rental reversion. Revenue and profit from the hotel segment soared 97% and 102% YoY to HK$1.35bn and HK$395mn respectively. Hotel revenue rise 97% in FY11: In 2011, revenue and profit from the hotel segment soared 97% and 102% YoY to HK $1.35bn and HK $395mn respectively. The robust profit growth is primarily due to the substantial growth in gaming revenue (up 39.7%) from Grand Emperor Hotel, which income has been consolidated to the Group in FY11. The increase in number of mainland visitors and in their purchasing power through RMB appreciation are the major drivers of hotel business in FY11. Figure 1: FY11 final results Change Remarks Revenue HK$mn HK$mn (%) Lease of properties Properties development Hotel and related operations 1, Total Segment Profit (Loss) Lease of properties Properties development Hotel and hotel related operations High occupancy rate & positive rental reversion Market expense for Harbour One and The Java Increased revenue in gaming concourse Increase shareholding of Grand Emperor Hotel from Total Segment Profit Revaluation gain on properties Net Profit Earnings per share Basic HK$1.00 HK$ Diluted HK$1.00 HK$ Source: Emperor Securities Research 2

3 85 of 108 units has to-date been sold, bringing in about HK$590mn of sale proceeds. Strong Sales of 18 Upper East: Launched in April 2011, 85 of 108 units has to -date been sold, bringing in about HK$590mn of pre-sale proceeds at an average selling price (ASP) of HK$9,000 per s.f.. The remaining 23 units are mainly located on upper floors, and are expected to reap at a higher ASP of around HK$12,600 per s.f.. Shopping areas of approximately 12,000 s.f. GFA, value about HK$300mn, will be launched shortly, with completion scheduled Q The Prince Place project near-term driver: We believe the The Prince Place will be the near-term income driver for EIH. Planned to be launched in 3Q 2011, the 30,000 s.f. GFA project will offer 36 units; Assuming ASP of HK$12,000 per s.f. and development cost of HK$7,800 per s.f., the estimated EBIT could amount to HK$126mn. The project is scheduled for completion in Q Sales proceeds from the Emperor International Square (EIS) and 66 Jardine s Bazaar will greatly improve the Group s gearing. A significant increase of development property revenue will be contributed by the Harbour One and the Java in FY12. Debt reduce from disposal of Emperor International Square: In May 2011, EIH entered into a provisional agreement with Central Source Limited to dispose of Emperor International Square (EIS), located at 7 Wang Tai Road, Kowloon Bay, Kowloon, with a consideration of HK$850mn. In addition, EIH also sold 66 Jardine s Bazaar with a consideration of HK$280mn on June 2011.Upon completion, the total capital gain of about HK$470mn will be recognized in FY12. The sales of above investment property will greatly improve the Group s gearing. Harvest period of lucrative development projects in FY12: In June 2011, The Harbour One, with about 91 of 103 total units sold, will realize a total sale proceed of over HK$1.73bn in FY12, representing an average selling price of HK$14,000. The Java at North Point also recorded about 95% sold at ASP of HK$11,300 per s.f.. Both projects will be completed in FY12 and would likely create a total pre-tax profit of over HK$1.4bn. Figure 2: Investment Properties Ready for Lease Retail - R; Commercial - C; Office - O; Service Centre SC Source: Information, Emperor Securities Research Location Total GFA Book Value Type (s.f.) (HK$'000) 8(G-3/F), 20(G&3/F), 22, 24, 50-56, Russell Street & 76, Percival Street, Causeway Bay HK 62,600 5,203,400 R/C G-1/F, 4, 6, 8, Canton Road, Tsim Sha Tsui HK 4, ,000 R 507(G/F), 523(G&1/F), Lockhart Road, Causeway Bay HK 2,800 1,394,000 R Emperor Group Centre, Wanchai HK 188,000 1,350,000 R/O Fitfort Shopping Arcade, North Point HK 130,000 1,200,000 R Emperor Plaza, Tsuen Wan HK 214,000 3,675,800 R/O Others HK 373, ,400 C Retail Units, Grand Emperor Hotel Macau 5,000 92,700 R/C Shops & Carparks, Emperor Lakeside Metropolis, Xiamen PRC 63,000 R Total 1,042,700 3

4 Figure 3: Investment Properties under Development Location Total GFA Book Value Type Completion Date (s.f.) (HK$'000) The Pulse, Repulse Bay HK 143, ,300 R Avenida de Infante D & , , Avenida de Praia, Grande Macau Macau 30, ,000 R 2013 Chang'an Avenue East, Beijing PRC 1,000,000 1,170,000 R/O 2015 Emperor Star City, Shanghai PRC 1,300,000 1,115,000 R/O 2016 Total 2,473,000 3,514,300 Retail - R; Commercial - C; Office - O; Service Centre SC Source: Information, Emperor Securities Research Figure 4: Property Development to be Launced for Pre-sale Total GFA Site Area Book Value Expected ASP Expected Sales Proceeds (s.f.) (s.f.) (HK$ 000) (HK$/s.f) (HK$ 000) Completion Date Prince Edward Road West, HK 30,000 3, ,700 12, , Connaught Road West & A Des Voeux Road West, Sai Wan, HK 185,000 18,300 1,168,800 20,000 3,700, Phase I, DD210, Saikung, HK 26,000 66,000 48,000 25, , Portland Street, HK 34,000 4, ,000 10, , Emperor Hotel, Happy Valley, HK 59,000 6, ,000 25,000 1,475, Total 334,000 97, Source: Information, Emperor Securities Research Figure 5: Property Development Launched for Pre-sale Harbour One, Sai Wan, HK The Java, North Point, HK 18 Upper East, Sai Wan Ho, HK Pre-sale Date May 2010 Jul 2010 Apr 2011 Units Sold 91/103 (88%) 71/75 (95%) 85/108 (79%) Total GFA Site Area Book Value Total 292,000 28,000 1,291,300 Source: Information, Emperor Securities Research Land Cost + Construction Cost Amt Realized on Sold Units Total Est. Amt on 100% Sold Units (s.f.) (s.f.) (HK$ 000) (HK$ 000) (HK$'000) (HK$'000) 140,000 14, ,200 69,000 6, ,600 83,000 7, , ,000 (HK$6,430/ 501,000 (HK$7,260/ 1,735,000 (HK$14,000/ 730,000 (HK$11,300/ 520,000 (HK$6,270/ 590,000 (HK$9,000/ 2,334,000 (HK$16,600/ 946,000 (HK$13,900/ 1,023,000 (HK$12,600/ 4

5 Income Statement Year Ended 31 March (HK$mn) FY09 FY10 FY11 FY12E FY13E Turnover by segment Property investment Property development , Consultancy Hotel ,350 1,580 1,817 Total 348 1,450 1,785 5,501 3,274 Results by Segment Property investment Property development (10) 184 (112) 1, Consultancy Hotel Total ,477 1,392 Unallocated expenses (55.3) (266) (88) (84) (79) Net finance cost (120.2) (83) (67) (161) (148) Operating Profit ,232 1,164 Revaluation (1,758) 2,794 3,278 2,470 2,000 Share of result associates Profit before tax (1,683) 3,334 3,800 4,702 3,164 Taxation 146 (149) (99) (368) (192) Minority Interests 0.4 (125.9) (256) (250) (275) Net profit (1,537) 3,059 3,445 4,084 2,697 Source: Emperor Securities Research Balance Sheet As at 31 March (HK$mn) FY07 FY08 FY09 FY10 FY11 Investment properties 3,996 6,674 6,181 13,333 17,928 Property, plant and equipment ,464 1,673 Prepaid lease payments Other non-current assets 1,112 1,547 2, Total non-current assets Bank balances and cash Trade and other receivables Properties held for sale Properties under development Other current assets Total Current Assets Trade and other payables Taxation payable Secured bank borrowings Other current liabilities 1,129 1,961 1, Total Current Liabilities Amount due to a related company Secured bank borrowings Deferred taxation Other noncurrent liabilities Total Noncurrent Liabilities Share capital Reserves Equity attributable to Company owner Minority interests Total Shareholders Equity 4,666 6,400 4,792 10,915 4,926 5

6 DISCLAIMERS & DISCLOSURES The information contained in this report has been compiled from sources believed to be reliable and has been compiled with high integrity, but Emperor Securities Limited ( Emperor Securities ) or any member of Emperor Capital Group ( ECG ) does not make any representation or warranty as to its accuracy, completeness or correctness. The information and opinions contained in this report are or may be subject to change or revision without any notice. This report is for information purposes only. No representation, warranty or guarantee whatsoever, whether expressed or implied, is made as to its accuracy or completeness and should not be construed as an offer to buy or sell or the solicitation of an offer to buy or sell the securities mentioned. Emperor Securities and ECG do not accept any responsibility or liability whatsoever for any direct or consequential loss or damage of whatsoever nature arising from or as a result of the use in whole or in part of this report or any of its contents. The research analyst(s) who prepared this report hereby confirm the views expressed in this report only reflect the personal views of the research analyst(s) about the subject company(ies) and their securities. The research analyst(s) also confirm the research analyst(s) were not, are not, and will not be receiving any direct or indirect compensation or other benefits for expressing the specific recommendation(s) or view(s) in this report. Emperor Securities is a wholly-owned subsidiary of ECG. Both ECG and Limited are companies listed on the Hong Kong Stock Exchange and with a common controlling shareholder. Apart from that, Emperor Securities and ECG and their respective directors, officers, partners, representatives, or employees may have positions or otherwise be directly or indirectly interested in the securities mentioned in this report or may buy, sell, or deal or offer to buy, sell, or deal in or with such securities from time to time, whether as principal for its or their own account or as agent or in any other capacity for or on behalf of another person. Copyright protection and other rights exist or subsist in this report, which may accordingly not be used for any other purpose, nor sold, distributed, published, or reproduced in any manner without the express consent of Emperor Securities. 6

7 Contact Us Headquarter 23-24/F, Emperor Group Centre, 288 Hennessy Road, Wan Chai, HK Tel : Hong Kong Hotline (852) Northern China Toll-free Hotline Southern China Toll-free Hotline Macau Toll-free Hotline Fax : Hong Kong Hotline (852) Emperor Financial Services Centre Northern China Toll-free Hotline Southern China Toll-free Hotline Macau Toll-free Hotline Shops 2-6, G/F, East Ocean Court, 525 Shanghai Street, Mongkok, Kowloon Tel : Hong Kong Hotline (852) Northern China Toll-free Hotline Southern China Toll-free Hotline Fax : Hong Kong Hotline (852) Hong Kong Island Northern China Toll-free Hotline Southern China Toll-free Hotline Shop 1, 1/F, Tung Che Commercial Centre, No.246, Des Voeux West Tel : (852) Fax : (852) Office A, 2/F, Tat Fat Building, No.50-52, Russell Street, Causeway Bay Tel : (852) Fax : (852) Room 705-6, Tai Yau Building, 181 Johnston Road, Wanchai Tel : (852) Fax : (852) Shop E, G/F A King s Road, Quarry Bay Tel : (852) Fax : (852) Kowloon Shop 9-11, G/F, 83 Wuhu Street, Chuang s Hunghom Plaza Tel : (852) Fax : (852) New Territories 16/F, Hang Seng Tsuen Wan Building, No.289 Sha Tsui Road, Tsuen Wan Tel : (852) Fax: (852) Shop 2, G/F Kam Wo Bu & Kam Hing Building, No Shun Lung Street Sha Tau Kok Tel : (852) Fax : (852) G/F, 19 Tai Wai Road, Tai Wai Tel : (852) Fax : (852) Mainland Information Centre Shanghai 2202, City Gateway, 398 Caoxi Road (N), Shanghai Tel : (86) / (86) Fax : (86) Shenzhen , 6/F, New World Center, No 6009, Yitian Road, Futian Distrct, Shenzhen Tel : (86) / (86) Fax : (86) Emperor Wealth Management Limited Shops 2-6, G/F, East Ocean Court, 525 Shanghai Street, Mongkok, Kowloon Tel : (852) Fax : (852) Tel :(852) Fax :(852) esl.research@emperor.com.hk Us esl.cs@emperor.com.hk Emperor Futures Limited efl.cs@emperor.com.hk Emperor Wealth Management Limited wealthmanagement@emperor.com.hk G/F, 216 Castle Peak Road, Sham Shui Po Tel : (852) Fax : (852) Shop 4, G/F, No Nga Tsin Wai Road, Kowloon City Tel : (852) Fax : (852) Shop A, G/F, , Prince Edward Road West, Prince Edward Tel : (852) Fax : (852)