China Real Estate Developers: Goldman Sachs Offers the Target Price of HK$5.08 for Evergrande, Whose Full-Year Sales Volume is Expected to Exceed RMB 50 Billion

Oct 21, 2010, 05:09 ET from Sina Leju

BEIJING, Oct. 21 /PRNewswire-Asia/ -- Though the China real estate market is under the pressure of multiple regulations and controls, the leading enterprises with its layout in the second- and third-tier cities are still the target pursued by the international investment banks. Recently, according to the management officers of Evergrande (3333.HK) listed in Hong Kong, the sales volume this year is expected to exceed RMB 50 billion. The sales and strong growth expectations have attracted many international investment banks to offer Evergrande the "Buy" rating. It is reported that Goldman Sachs has offered the target price of HK$5.08 for Evergrande. An original report from Sina Leju on the situation follows:

On October 21, according to the research report released by Goldman Sachs, after regulation and control in the China real estate market, the gradually rationalizing homebuyer sentiment and developers' weakening balance sheets might have an effect on selling prices. But amid a prolonged industry slowdown, Goldman Sachs is still positive on the enterprises that are rapidly expanding their exposure to central and western China and focusing on improving their product quality to enhance product attraction. The listed developers with strong balance sheets, good access to capital, and strong execution skills are more likely to be industry consolidators in the future.

According to the report by Goldman Sachs, it is expected Evergrande's contract sales performance will outperform its peers on the back of its high exposure to central and western China, reasonable product pricing with competitive product quality and strong execution focusing on asset turnover, which will solidify its leading industry position and further improve medium-term margin outlook from economics of scale. Goldman Sachs reiterates its top Buy rating on the real estate stock of Evergrande, setting the target price of HK$5.08.

According to the previous media report, Evergrande revealed at the Great China Investment Conference held in Macao by Citigroup that the sales target of RMB 40 billion this year is expected to be achieved by the end of this month. It is believed that there is no longer any doubt to achieve the full-year sales target of RMB 50 billion. In November and December, there will be 6 projects to be launched, and the full-year sales volume is estimated to increase to RMB 50 billion - 55 billion.

It is reported at this conference, the management officers of Evergrande said, the saleable properties of Evergrande next year would bring the total value of RMB 140 billion, and the sales target would be no less than RMB 70 billion. The management officers are planning to take the land reserve in the second- and third-tier cities, and it is expected that there will be 120 saleable projects in 50 cities. The rate of margin of the Group maintains at 15%. The financial situation is steady. The cash in hand exceeds RMB 15 billion, with the net debt ratio of 40% to 50%.

According to the sales data of the first 9 months released by Evergrande, from January to September, the accumulative contracted sales volume of Evergrande was RMB 35.6 billion, achieving 89% of the full-year target of RMB 40 billion; the accumulative contracted sales area was 5,698,000 square meters, with the average contracted selling price of RMB 6,248 per square meter. There was an increase of 54.2% in the accumulative contracted sales volume, an increase of 26.5% in the sales area and an increase of 21.8% in the average selling price on a year-on-year basis.

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SOURCE Sina Leju