CLSA stated in its research report, despite the economic impact of Covid-19, the Shenzhen property market remains resilient. Shenzhen projects have continued to contribute over one-third of Kaisa’s overall contracted sales. It expects a faster conversion of URPs into Kaisa’s land-bank. The credit outlook is likely to be stable and this hints at a higher chance it will increase the Group’s dividend payout.
The report also mentioned that Kaisa’s large land reserve in Shenzhen helps ensure its sales performance. URP will remain a key earnings driver. Despite the economic impact of Covid-19, Shenzhen property market recorded continuous improvement in both sales volume and ASP. Therefore, Kaisa, with 33% of its saleable resources located in Shenzhen, has continued to outperform the overall market. During the first four months in 2020, Kaisa achieved total presales of RMB18 billion, of which, 39% came from Shenzhen. The firm believes Kaisa will continue to experience a strong presale pickup in the next few months. It estimates Kaisa to be able to achieve total presales of RMB30bn by end of the first half, representing 30% of its full-year sales target.
CLSA also noticed the increasing contribution from URPs. Kaisa expects a GFA of 872,000 sq.m., equivalent to RMB46 billion in value, will be converted in 2020. A total site area of 40 million sq.m., upon conversion, will bring in additional saleable resources of RMB2.5 trillion, of which, 44% is located in Shenzhen.
CLSA sees strong housing demand in Shenzhen. Kaisa’s uniquely large landbank exposure to Shenzhen makes it stand out among property companies. It is bullish on the Shenzhen property market and so is Kaisa.
