除了買房還有詩和股票麥格里數據研究：中國房地產——如何操作房地產股票賺錢

新聞 06-22

麥格里數據研究：中國房地產——如何操作房地產股票賺錢

China Property

How to make money from China property stocks

The Macquarie Formula

We went through the stock performance of 30 China property stocks for each of the last 10 years to try to find out how contracted sales growth and EPS (forecasts upgrade/downgrade, growth, actual vs. expectation) help determine the winners. A lot of the findings are counterintuitive, in our view. Some reflect the increasing short-term mentality of investors as well as a gradual change of the demographics of investors who can influence stock prices. The objective is to pick one or more of the top five stock performers each year. The fifth-best stock outperformed MSCI China by -21ppts to 105ppts every year last decade.

Formula #1 is to pick one company (market capitalization >US$2bn) which has

one of the top 10 current-year and next-year EPS forecast upgrades plus top 10 contracted sales growth during the year. There is a 73% chance that the stock is one of the top five stock performers. If we want more stocks to choose from, we need to compromise the hit rate to 63% by using Formula #2, which simply picks one company (>US$2bn) with top five (instead of top ten) current-year and nextyear EPS upgrades. Formula #1 points to EVER (not rated) and CGAR as top performers in 2017. Formula #2 agrees and adds YANL and AGIL.

Back to fundamentals

The market does not give credit to companies with slow but stable growth.

Prudent players no longer outperform during a down market. However, in our view, those that achieve, in any given year, solid contracted sales growth, EPS growth, EPS upgrades and still beat EPS forecasts are very rare and deserve to be stock outperformers. CGAR has achieved that YTD in 2017 whereas CRLN did that in 2016. Over the last decade, COLI, CRLN, VANK and CGAR most frequently delivered all the above growth.

Stock picks

VANK proved to be a true blue chip with the best accumulated performance of 47% the last five years and 19% the last ten years, even if we took out its best year in each respective period. This, combined with accumulated contracted sales growth of 200% and annual sales growth volatility of only 9% the last five years, cements its market leader position in the sector, by a wide margin.

We recently upgraded SHIM to Outperform with a turnaround this year, with contracted sales growth set to regain momentum— up 33% YoY this year, vs 1% CAGR over 2014-16—thanks to a spillover to lower-tier cities. Its valuation is the cheapest amongst large- and mid-cap China property stocks, at 53% NAV discount, 4.8x FY18E PER with a 7-9% yield in FY17-19E.

2016 was an inflection point for LONF with a sharp 62% increase in sales, followed by 150% during the first five months of 2017, the second-best performer so far. We expect further upside for the stock in 2017 and in the medium term due to its quality land bank with relatively small exposure to overheated cities.

Agile is our small-cap top pick. We continue to favour the company as business is now back to normal, with resumption of land acquisition and gross margin recovery. Valuation remains cheap at 4.9x FY18E PER and 63% discount to

NAV.

How to makemoney fromChinaproperty stocks

Over the last ten years (May 31, 2007 to May 31, 2017), excluding dividend payments, only 15 out of the top 30 HK-listed China developer stocks were up accumulatively. If we take out the sector rally YTD, only nine were up meaningfully, a very disappointing and shocking performance, considering the physical market has performed very well despite many round of cooling measures launched against the property buyers and developers. If we further take out each stock』s best year of performance, only the blue chips, VANK, COLI and CRLN, plus two new entrants, LOGA and CIFI, are above water, vs sector median of -60%.

Two-thirds of the companies have improved earnings. Yet, six out of the last ten years, their average annual performance was negative, worse than MSCI China, which is down four out of the last ten years. We believe property stocks have been unfairly undervalued or simply ignored by investors, leading to a continuous de-rating process until last September, when South-bound inflow reversed the trend. We hereby propose a formula to pick the winners.

Summary of findings

We set our target of finding one of the top 5 stock performers with market capitalization above US$2bn for each year. As seen from Fig. 4 above, the 5th best performer delivered average annual performance of 33% since 2007, outperforming MSCI China by 24 percentage points. Of course, if our formula can help pick the 1st to 4th best performers, it will be even better.

The two key factors we use are contracted sales growth and EPS forecasts. We find that other fundamental metrics, such as margin, gearing, dividend yield, ROE, turnover and valuation multiples have very little bearing on stock performance. We also take away macro ups and downs, which have big impact on overall sector trend, but do not help differentiate the winners from the rest.

For contracted sales, we simply look at annual growth as reported by the company. Absolute size of contracted sales has no obvious influence on stock performance. Big is not necessarily better.

For EPS, we look at current-year consensus upgrades and next-year consensus upgrades within a year. We also look at reported EPS beats or misses versus consensus as well as reported EPS growth.

Not surprisingly, the combination with the best explanatory power is current-year upgrade plus next-year upgrade plus contracted sales growth. The top 5 performers in the above factors are the top 5 performers in stock price. However, it is very difficult to find a stock fulfilling all three factors. Since 2009, only a grand total of three stocks achieved that:

CGAR twice (2017 YTD up 112% and 2013 up 15%), LONF (2010 up 24%) and SZIN (2015 up 63%). Even if we relax the market capitalization, the result is the same.

Thus, we need to broaden our net to top 10 factor performers in order to hit top 5 stock performers. Factor 1 is current-year EPS upgrades from beginning to end of the year. Factor 2 is next-year EPS upgrades over the same period of time. Factor 3 is annual contracted sales growth achieved. We collect the top 10 performers for each of the above factors and pick a subset containing companies which fit all three factors.

We then compare this subset of stocks against the top 5 stock performers of the same year.

The hit rate is the percentage of stocks in the subset also successfully being top 5 stock performers. The hit rate was 100% in 2017 YTD, 2015, 2014, 2013 and 2011. The challenge again is finding stocks which are top 10 in all three factors. Most of the time, there were two.

Some time, there was only one. The challenge continues to be too few factor performers.

If we aggregate the successful cases from 2012 to 2017 YTD, it becomes easier for us to compare the usefulness of each factor. The summary table below shows that there is a 73% success rate to hit the top 5 stock performers if we use top 10 current-year plus next-year EPS upgrades plus contracted sales growth. If we want the top performer, there is a 25% chance of correctly the best performer of the year (Fig. 8).

It is not perfect, but we can also see the predictive power of other factors. Focusing on theblue column, from the subset of top 10 performers in each of the following factors, the most popular and transparent factor, contracted sales growth, only has a 34% hit rate when employed solo. Next-year EPS upgrades by itself has a 33% hit rate, followed by EPS actual growth at 29%. Surprisingly, having actual earnings beating consensus forecast has the lowest hit rate at 22%. This may be because earnings beats cause short-term stock price excitement but are unlikely to lead to full-year stock price outperformance just by themselves.