Citi identifies Chinese property developer Country Garden as one of the world's game-changing companies
SHUNDE, China, April 13, 2017 /PRNewswire/ -- Chinese property developer Country Garden Holdings recently announced contracted sales of 150.66 billion yuan (approx. US$21.8 billion) for the first quarter of 2017. The company had previously announced on March 22 that sales had doubled in 2016 and that it is now one of China's three leading property developers. Driven by the impressive sales results, the stock closed at HK$7.60 (approx. US$0.90) on April 11th, up 5.4 per cent over the previous day's close.
Country Garden delivered industry-leading growth in sales during the first two months of this year, thanks to the overall stability of the housing market, the company's balanced business portfolio, the improvement of its product competitiveness and its proactive marketing strategy, which included staying open and continue to provide products and services during the Chinese Lunar New Year holiday, among other favorable factors. The world's leading banks, including Citi, Deutsche Bank and JPMorgan Chase & Co. have taken note and issued positive reviews of the Chinese property developer's sales performance.
Citi released a research report on April 7th in which the bank maintained its "buy" rating on Country Garden. Prior to the issuing of the report, Citi had upgraded its rating on Country Garden from "hold" to "buy" based on the developer's financial results for 2016. Citi believes that Country Garden is "one of the game-changing companies". Citi said in the report that Country Garden is the first company to benefit in large measure from the fast-growing Chinese housing market. The bank also stated that it upgraded the rating on Country Garden to "buy" in view of the fact that the developer's financial statements have proved robust and the stock has been buoyed by the company's strong sales performance and its stock repurchase plan.
Deutsche Bank published a report on April 6th in which the bank provided separate rankings of what it considered the best performing publicly-traded Chinese companies in terms of cash flow, degree of leverage, number of orders in the pipeline, capital expenditure plans and dividend payout based on their year-end 2016 financial statements. Country Garden was included in the report's cash flow and leverage rankings, evidencing that the developer's financial situation remains healthy. Deutsche Bank previously released a study in which the bank lifted the target share price of Country Garden by 3.3 per cent to HK$7.72 (approx. US$0.90) after the developer announced its financial results for last year. In addition, the bank forecast Country Garden's sales in 2017 to exceed the developer's original sales target of 400 billion yuan (approx. US$58 billion), suggesting that sales would reach 420 billion yuan (approx. US$60.9 billion). The more than positive confirms the bank's strong confidence in the developer's sales growth.
On March 27, JPMorgan said in its research report that the bank maintains an "Outperform" rating for Country Garden, considering the developer's "strong cash flow growth, a declining net gearing ratio, steady performance in the second half of 2016 and decreased financing activities". JPMorgan noted that Country Garden is the only listed real estate company in China that continues to develop large real estate projects in and around first- and second-tier cities, an approach that the bank considers as having low policy-related risks and is consistent with China's new urbanization policy that is a part of the country's economic development strategy as outlined in the 13th Five-Year Plan. Country Garden is also one of the few real estate companies to have a well thought-out and reasonable incentive system, with headquarters trusting regional branches on land acquisitions, ensuring the profitability of projects.
In addition, Nomura, in a research report issued on March 27, expected to see Country Garden's earnings growing by more than 30 per cent this year. It raised Country Garden's target price from HK$6.11 to HK$7.90 per share, and maintained a "Buy" rating.
Chinese banks are especially bullish about Country Garden. On March 23, BOC International raised Country Garden's target price from HK$7.25 to HK$9.00 per share in its research report. On March 23, CICC upgraded its rating for Country Garden from "Neutral" to "Recommend", and raised the target price from HK$3.79 to HK$8.58, more than doubling the original projection.
The management of Country Garden was calm when commenting on the strong sales performance of the first quarter. On the day when the company announced sales for the first quarter of this year, Country Garden chairman Yang Guoqiang (who formally spells his name Yeung Kwok Keung), delivered words of encouragement to the company's more than 100,000 employees when he said: "Keep the spirit of the dedicated craftsman in your heart while learning from prior experience: Play to your strengths. Learn from your mistakes in order to avoid repeating them. Let's keep marching down the road that lies ahead of us!" Country Garden has set 2017 as its Quality Management Year. Yang has stressed many times the need to emulate the spirit of dedicated craftsman as the distinguishing characteristic of the company's core competitiveness.
SOURCE Country Garden Holdings
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