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GDH City Drives H1:20 Results

Greenridge Global Securities Issues Update Guangdong Land Holdings [HK: 124] August 26, 2020

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GDH City Drives H1:20 Results.  GDL reported first half results with Revenue of HK$1,898.5 million, its highest Revenue in a reporting period since switching to property development.  The sharp increase was attributed in large part to the Company completing the NW Land portion of GDH City in the first half and delivering 17,582m2 in units.  Much of the remainder was from Laurel House, which delivered 9,053m2 in the first half, higher than we expected, while its commercial units, GD?Delin, offered tenants some rental concessions during the COVID shutdown, and ended the period with an occupancy rate of 83.5%.  Gross Profit for the period was HK$875.3 million.  Operating expenses were up from previous periods, however most was related to commission expense from the higher sales in the half.  GDL also booked a HK$1,893.1 million fair value gain from GDH City.  Income Tax Expense was HK$878.2 million, resulting in Net Income of HK$1,736.8 million, or 101.48 per share.  

Updates on Projects Under Development.  

  • On August 4, the Company announced the curtain wall agreement for the Northern Land at GDH City for a total cost of HK$128,957,000, of which HK$37,484,000 is for the basement and commercial shopping buildings and HK$91,473,000 is for the office tower.  The total cost of this keeps all three portions of the GDH City project in range of our estimated budget.  GDL is also continuing its efforts on a bulk sale transaction for Northern Land office space, in conjunction with its ongoing collaboration with the Shanghai Diamond Exchange.  The Northern Land is still scheduled for the second half of 2022 and the Southern Land is still schedule for 2023, both of which remain on schedule.  
  • The Chenyuan Road Project in Jiangmen City is in the earthmoving and piling works phase, with pre-sales to start in 2021 and project completion slated for the second half of 2022. 
  • The Jinwan Project in Zhuhai is moving along, with construction expected to begin this year, and be completed in 2024.  The entirety of the 166,692m2 project, which is mixed residential and commercial, will be held for sale.

 

Model Update.  We made a number of changes to our model, including adding in cost and profit estimates for the Jinwan Project in Zhuhai, updating deliveries of existing projects, and increasing operating expenses going forward.  

Maintaining Rating & Target.  GDL continues to develop and expand its property portfolio, with the completion of the NW Land of GDH City, the continued development of the Northern and Southern Land of GDH City, and the acquisition of new projects that begin to set up cash flow streams beyond the initial GDH City project.  With continued progress on all projects, despite the COVID impact on the economy, we are reiterating our Buy rating and HK$4.00 target price on Guangdong Land Holdings.  Our target price is based on our DCF model that covers GDL’s entire project portfolio, discounted at 6.5%.

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