2017-08-18Goldman Sachs: Logan Property’s Interim Results Above Expectations One Stop Shop for Growth, Returns and dividends Maintains a “Buy” Rating, Raises Target Price to HK$8.7

Goldman Sachs: Logan Property's Interim Results Above Expectations One Stop Shop for Growth, Returns and dividends Maintains a 'Buy' Rating, Raises Target Price to HK$8.7

Datetime：[2017-08-18]

China/Hong Kong, 18August2017- In its latest research report, Investment bank Goldman Sachs Gao Hua ('GSGH') points out that the interim results of Logan Property Holdings Company Limited ('Logan Property' or 'the Group', HKEx stock code: 3380)far exceed expectations and surprised the capital markets and investors. Driven by the booking of highly lucrative projects in Huizhou and Shantou, the Group's core profit soared 195% year on year to RMB2.55 billion, withgross profit margin and core profit margin surged to 39% and 21% respectively. The Group's existing saleable resources of RMB388 billion will continue to drive growth of contract sales. In view of this, GSGH remains bullish about the strong growth prospects of the Group, maintaining its 'Buy' rating and raising its target price by 9% to HK$8.7.

GSGH points out that the cost of Logan Property's existing land bank is less than 30% of the market's average selling price. Therefore,GSGH believes thatthe Group will maintain high profit margins in the next two years, with an expectedgross profit margin of 35% and a net profit margin of 16%. With the strong sales in the first seven months,ample saleable resources (with the saleable resources in Guangdong-Hong Kong-Macau Greater Bay Area accounting for over 80% of the total),and as Logan Property raised its annual sales target to RMB37 billion, GSGH remains optimistic about the growth prospects of the Groupand expects its sales and earnings to grow at a compound annual growth rate of over 30% in the next three years.

GSGH believes that Logan Property is resilient to adversity and deliver high return on investments. Its average borrowing cost has dropped from 6.1% to 5.9%, and GSGH expects its net gearing ratio will remain below 80%, supporting a 35%-40% dividend payout ratio and the average dividend yield is expected to be 6% in 2017-2019, which is higher than the industry average of 5%.