- August 20, 2020
- Powerlong reported a strong set of 1H20 results, with core net profit growing 44% YoY.
- They are on track to deliver a 45% 2020E earnings growth and a 10.3% 2020E div yield, in our view.
- Powerlong’s discounted valuations (4.9x 2020E P/E) compared to peers (sector: 5.5x 2020E P/E) reflects investors’ concerns with COVID-19 impact on Powerlong’s commercial real estate, in our view.
- We believe Powerlong’s better than expected 1H20 rental income (53% of our full year estimate achieved) should alleviate such concerns.
- We believe the stock should trade closer to commercial property peers such as CR Land (9.1x 2020E P/E) and Longfor (11.1x), due to their better earnings quality (recurring rental income).
- We reiterate our Buy rating, with a HK$6.50/sh target price, which is based on a 6.0x 2020E target P/E.
