AMTD Research | At the Forefront of China Property: A Solid Macro Economy Recovery

Key Highlights

• Despite market’s concerns with Evergrande’s cash flow position, we believe the macro property data are suggesting that China is close to a full macro recovery.
• Aug National Residential Sales was up +29% YoY, Investment rose 11.8% YoY, and the industry is generating a healthy positive YTD Free Cash Flows.
• We believe major developers are on track to achieve their full-year target and some names (e.g. Redsun and Powerlong) with above 60% of run rate as of Aug might deliver positive surprises in contracted sales.
• The recent sell-off presents a buying opportunity into such quality names, in our view.
• China developers sector is trading at an attractive valuation with 2020E P/E of 5.1x on simple average and 5.9x P/E on market-cap-weighted average.  This is ~0.86 SD below the 3-year historical mean.