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Companies: Guangdong Land Holdings Limited (GDLAN 124)

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Greenridge Global Equity Research

Update June-4-18 Click Here>>

Update May 3-18 Click Here>>
Update April 10-18 Click Here>>
Update Jan-25-18 Click Here>>
Update Nov-21-17 Click Here>>

 

Update Sept-13-17 Click Here>>
Update April -26-17 Click Here>>
Update March-31-17 Click Here>>
Initial Report March-30-15 Click Here>>



Update Notes:6  -4-18        Acquisitions Look To Be An Accretive Deal For Shareholders

 

 

GDL Releases Circular on GZ Acquisitions.  Last week, GDL filed its Circular related to the purchase of two projects in Guangzhou, which it intends to acquire from GDH, for a total of RMB 1,200,490,000 in cash and the repayment of RMB 842,139,229 in outstanding loans from GDH, or RMB 2,042,629,229 (HK$2,528,320,000) in total.  GDL will pay RMB 842 million from cash on hand and pay the remaining RMB 1.2 billion from bank borrowings.  Earlier this month, it obtained a RMB 500 million banking facility and expects to receive the remaining RMB 700 million prior to completion, all with annual interest rates between 4.75% and 5.00%; the same interest rates as the GDH loans.  Vigers Appraisal set the value of the properties at RMB 4,560,000,000, with an adjusted NAV of RMB 1,381,082,000 (which includes an estimated RMB 963.2 million in land appreciation taxes and RMB 321.2 million corporate income taxes), thus making the cash purchase price a 13.1% discount to the adjusted NAV.  We expect this acquisition to be approved at its Special General Meeting on Thursday.  See page 2 for more details on Zhuguanglu and Baohuaxuan.

 

Model Update.  For modelling purposes, we are assuming all Baohuaxuan units are sold in 2018 and delivered between now and through the first half of 2019, with car parking spaces to follow in 2019 and the first half of 2020.  We are assuming Zhuguanglu residential deliveries start in late 2018, with the bulk being delivered in 2019 and the remainder in early 2020, with the bulk of car parking spaces being sold in 2020.  We are assuming rental income from the commercial space will start in the first half of 2019.  We also included a Gain on Bargain Purchase of HK$233 million, given the discount on this deal.  We also note that the use of this cash will require GDL to find debt financing for Buxin, as has been discussed previously.

 

Maintaining Rating & Increasing Target.  As we had been discussing in previous reports, we thought finding another Ruyingju-like deal to generate profit to bridge to the beginning of Buxin sales, which this deal will do, would be a catalyst for the stock, which currently sits around its 52-week high.  With the addition of Zhuguanglu and Baohuaxuan we are reiterating our Buy rating on Guangdong Land and increasing our target price from HK$4.50 to HK$4.75.  The increase in target price is based on the effect of this acquisition and continued movement towards completion of the NW Land of Buxin.

Update Notes:1-25-18

Profit Expected In 2017 After Legacy Property Sale

Property Sale Improves 2017 Results.  GDL announced it expects to report Net Profit of at least HK$46.0 million for fiscal 2017, due in large part to the profit booked on the sale of old staff quarters in Shenzhen.  Through the first nine months of 2017, GDL had reported a Net Loss of roughly HK$3.0 million, which had been attributable to the sharp decline in sales and deliveries of the remaining units of the Ruyingju project. 

Model Update.  Other than adding in the profit tied to the property sale in H2:17, we left the remainder of our model in tact as we believe the Buxin Project is continuing to move along on schedule. 

Maintaining Rating & Target.  The gain on property sale in Q4:17 had little impact on the remainder of our model.  With Buxin continuing to move on schedule we are reiterating our Buy rating and HK$4.50 target price on Guangdong Land.  Our target price is based on our DCF model covering the duration of the Buxin project, which is nearly the same as the reassessed NAV of GDL as calculated by Vigers in the GDI Circular.

 

Company Description:

Guangdong Land Holdings Limited (GDL) is a Hong Kong-based investment holding company principally engaged in property investment and development.  The Company owns investment properties and developments in Guangdong, including its flagship property, the Buxin Project, a mixed-use commercial and residential project in the gold and jewelry district of Shenzhen.  GDL is a publicly listed subsidiary of Guangdong Investment Limited [HK: 270], which is a subsidiary of Guangdong Holdings Limited, a provincial level State Owned Enterprise.

Issued Shares***** 1,711,536,850 (as at 30 Nov 2017)
Industry Properties & Construction - Properties - Property Development(HSIC***)
Listing Date 08 Aug 1997
Financial Year Ends 31 Dec 2016
Chairman Huang Xiaofeng
Principal Office 18th Floor
Guangdong Investment Tower
148 Connaught Road Central
Hong Kong
Place of Incorporation Bermuda
Listing Category Primary Listing
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