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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  Ronshine China Holdings Limited    3301   KYG763681023

RONSHINE CHINA HOLDINGS LIMITED

(3301)
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End-of-day quote. End-of-day quote Hong Kong Stock Exchange - 02/26
8.64 HKD   +0.82%
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Buying the dip - China land kings see opportunity as prices cool

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11/03/2016 | 01:22am EST
Employees set up model apartments as they prepare a real estate exhibition in Hangzhou

HONG KONG (Reuters) - As China's property market shows signs of softening, the country's resurgent 'land kings' say they are ready to seize on any price weakness to buy more building plots - a conundrum for policymakers grappling with a toxic mix of risks in the sector.

Any indication developers are poised to increase their buying is likely to unnerve authorities, given the unprecedented debt burden these companies already carry. Many of China's most indebted companies are developers.

"Developers won't stop buying land, they're just waiting for the right moment," said Rosealea Yao, analyst of Gavekal Dragonomics based in Beijing.

Home and residential land prices have soared in many parts of China this year, prompting authorities to introduce restrictions on buyers and the ability of developers to raise fresh funds.

Over 20 cities have announced cooling measures over the past few weeks and the provider of China's official purchasing managers' index said on Tuesday that residential prices were showing signs of easing in October.

Land prices in top-tier cities, where most of China's property rally has played out, have fallen in the past month, research company CRIC said. The total land sold fell by 38 percent in October from September and the overall value of transactions dropped 49 percent, it said.

But property heavyweights say any cooling in prices is a chance to buy more land. Demand for new homes in big cities is still healthy - tales of couples divorcing to get better mortgages or sales of cupboard-sized flats abound - and residential housing supply is tight.

"We don't expect the property market to crash because of the tightening. It's still very cheap to borrow money," said an executive at a developer that has bought a dozen top-end land parcels across China in the last quarter.

"If prices come down somewhat, we'd be more optimistic on the health of the market," he said, declining to be identified as he was not authorised to speak to the media.

Another executive at a Shanghai-based developer said his group would sweep in: "Once land prices soften, we will jump back into the market especially in first-tier cities."

DEBT BURDEN

But underlining the debt risk, some analysts estimate China's newest land kings - the names given to companies willing to pay sky-high prices for land - would need home prices to surge more than 100 percent in the next three years to cover their costs.

Take, for example, Ronshine China (>> Ronshine China Holdings Co Ltd), which was crowned a land king in August when it outbid 17 rivals to pay $1.7 billion (1.37 billion pounds) for a plot in central Shanghai.

At that rate, Ronshine, a company that listed only in January, paid about 100,000 yuan ($14,756) per square metre - a record price for China - and close to top-flight plots in London's Kensington and Chelsea districts or New York.

Ronshine declined to comment.

Analysts and industry executives say the tougher rules on fundraising would strain the ability of some smaller developers to finance deals, forcing consolidation in a cut-throat market. Already, the market share of the top 20 developers has increased from a fifth to over a third, one executive said.

The new rules are being put into action.

CRIC said Shanghai asked bidders on three land sales in November to provide additional documentation on their funding.

Nanjing in the eastern coastal province of Jiangsu, which auctioned nine land parcels on October 14, requested that bidders provide the sources of their funding for deposits.

On October 23, Shanghai Shimao Co (>> ShangHai ShiMao Co., Ltd) said its application for a private share sale to raise 4.7 billion yuan had been rejected by the regulator, the first rejection since the China Securities Regulatory Commission (CSRC) tightened refinancing for property firms in August.

Still, developers are shrugging off the restrictions.

Shimao said it could use its internal cash to pay for three projects held by its subsidiaries.

"Companies are still positive on the market outlook, that's why many don't see it as a problem to leverage," said an executive at a state-backed developer.

"There's a lot of liquidity in the market."

(Reporting by Clare Jim; Editing by Anne Marie Roantree and Neil Fullick)

By Clare Jim

Stocks mentioned in the article
ChangeLast1st jan.
RONSHINE CHINA HOLDINGS LIMITED 0.82% 8.64 End-of-day quote.1.17%
SQUARE, INC. 3.55% 79.31 Delayed Quote.26.77%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.10% 7.0108 Delayed Quote.0.74%
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Latest news on RONSHINE CHINA HOLDINGS LI
2019RONSHINE CHINA : secures land in Zhengzhou at reserve price
AQ
2019RONSHINE CHINA : May contracted sales down 9%
AQ
2019RONSHINE CHINA : to issue US$200 million senior notes
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2019RONSHINE CHINA : Mar total contracted sales up 21%
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2019RONSHINE CHINA : year core net up 116% to RMB2.5bn
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2019RONSHINE CHINA : Feb sales up 12% to RMB7.35bn
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2016Buying the dip - China land kings see opportunity as prices cool
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Financials (CNY)
Sales 2019 50 532 M
EBIT 2019 8 571 M
Net income 2019 3 685 M
Debt 2019 37 844 M
Yield 2019 6,19%
P/E ratio 2019 3,51x
P/E ratio 2020 2,57x
EV / Sales2019 1,02x
EV / Sales2020 0,78x
Capitalization 13 487 M
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Mean consensus BUY
Number of Analysts 8
Average target price 13,08  CNY
Last Close Price 7,85  CNY
Spread / Highest target 96,8%
Spread / Average Target 66,6%
Spread / Lowest Target 42,9%
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Managers
NameTitle
Zong Hong Ou Chairman & Chief Executive Officer
Fei Yan Zeng CFO & Executive Director
Wen Zhou Qu Independent Non-Executive Director
Shu Cui Chen Non-Executive Director
You Zhi Ruan Executive Director & Vice President