Country Garden Holdings Company Ltd (2007.HK) is China’s third-largest residential property developer with a focus on suburban township projects for the middle class. The company builds townhouses, condos, car-parks, retail shops, as well as hotels. Country Garden owns a land bank of 140m sqm currently and operates 59 hotels with almost 14 thousand rooms located mainly in Guangdong Province. [mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”]
Since 2011, the company is among Forbes Asia’s Fab Top 50 Companies and recognized as one of Chinese Well-known Trademarks. Country Garden was founded in 1992 in Foshan/China and is today headquartered in Hong Kong. The company is listed on the main board of HKEX since April 2007. Shares can also be traded in the US and Germany.
Country Garden is building up aggressively its land reserves to pursue strong sales in the next two years. The company is furthermore seeking new growth opportunities by targeting towards bigger projects in China’s top-tier cities as well as by expanding abroad. Its most ambitious ongoing project currently is Forest City, a 38bn USD housing development on four artificial islands that will house 700,000 people near Malaysia’s border to Singapore. The company plans further ambitious projects across Southeast Asia in the near future to reduce risks from its domestic market.
With a staff of around 80,000 employees, Country Garden generated revenues of 57bn RMB (8.3bn USD) and a profit before tax of 9bn RMB (1.3bn USD), an increase of 21% and 11% respectively during the first six months of this year. For 2015 the company increased revenues by 34% while profit has fallen by 9%. Country Garden maintains a robust liquidity position with cash available of 31bn RMB (4.5bn USD). Nevertheless, a gearing ratio of nearly 400% – as we measure by total liabilities/equity – and an equity ratio of only 20% bear considerable risks in the balance sheet. A recently announced spin-off of its property services segment will strengthen the corporate governance structure and enhance the liquidity.
Shares of Country Garden are in an uptrend since August and gained 40% this year. The success of the company’s ambitious strategy will highly depend on interest rates development and the prosperity of its target region. 9 out of 25 covering analysts recommend only holding the stock. With the company’s high debt levels downside risks are very present.
AIS Rating: ★★★☆☆
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 H1 only |
|
|---|---|---|---|---|---|---|
| EPS (RMBcents) | 33 | 38 | 46 | 54 | 43 | 24 |
| Change | 29% | 14% | 21% | 16% | -20% | 4% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 9 | 16 | 1 | 7 | 20% | 13% | 398% | 3.8% |
* Equity / Total Assets, ** Total Liabilities / Equity
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