Recently, the people’s Bank of China and the China Banking and Insurance Regulatory Commission jointly issued the notice on doing a good job in M & a financial services for risk disposal projects of key real estate enterprises, encouraging banking financial institutions to do a good job in financial support and services for M & A of risk disposal projects of key real estate enterprises. The notice mainly focuses on six aspects, including: steadily and orderly carrying out M & a loan business, increasing bond financing support, actively providing M & A financing consulting services, improving M & a service efficiency, doing a good job in risk management, and establishing a reporting system and publicity mechanism.
M & A is the main path for the spontaneous liquidation of the industry in this round
Under the background of asymmetric real estate credit recovery, relying on industry mergers and acquisitions to digest non-performing assets may be the main way to clear the industry risks in this round. Previously, the market questioned the acquisition logic for several reasons: 1. The three red lines of high-quality real estate enterprises are still limited; 2. The M & a process of central enterprises is too complex; 3. The asset quality and price of private enterprises are too high; 4. When the sales expectation is uncertain, the reinvestment expectation is cautious. In our previous annual strategy, we summarized the general law of leveraging real estate enterprises: the pro cyclical concentration increased rapidly. Therefore, although the preference of refinancing for high-quality real estate enterprises has been fulfilled, whether the prosperity of the industry can be repaired smoothly is still the biggest premise for the promotion of M & A. when the sales expectation is uncertain, the cautious expectation of reinvestment is the biggest blocking point at present, that is, the core problems of current credit and fundamentals pointed to the demand side.
Improvement 1: the demand side is really repaired from the data
In November, the year-on-year growth rate of national commercial housing sales in a single month was repaired. Since December, the high-frequency sales data also showed that the sales area of new houses in key cities was – 10.8% year-on-year, further narrowed compared with – 20% in November. According to the securities times, more than 20 cities have released positive signals at the level of urban implementation policies such as provident fund support, loose purchase restrictions and house purchase subsidies. In addition, the improvement of mortgage quota has gradually realized the transmission of interest rate and lending cycle: in December 103, the interest rate of the first house in the city was 5.64% and that of the second house was 5.91%, both of which were 5 BP lower than that in November and 10 or 8 bp lower than that in September, In addition, the average lending cycle in December is 57 days, which is 11 days shorter than that in November (Shell Research Institute). Although the sustainability of sales is still in doubt (the short term is due to the replenishment of backlog demand in the early stage), the combined force formed by the support of regulators and the loose superposition at the mortgage level has played a certain role in stabilizing expectations in the short term, which is expected to alleviate the pessimistic expectation of reinvestment at the enterprise level.
Improvement 2: further optimization of financial institutions’ capital and service support
Several highlights of this document are also expected to alleviate the concerns of M & A of enterprises: 1. Focus on supporting M & A of high-quality projects rather than equity, which can activate the liquidity of the assets of insurance real estate enterprises to a certain extent and improve the flexibility of M & A of high-quality real estate enterprises; 2. Encourage banking financial institutions to provide financing services, speed up examination and approval, invest in M & A financing instruments, and improve matching efficiency while providing financial support; 3 “cooperate with the M & A parties to promote the local government to optimize the pre-sale fund management of the acquired real estate project” is expected to improve the project level cash flow; 4. The monthly report system reflects the development of M & a business, existing problems and suggestions, and does not rule out the further improvement of follow-up support.
What policies can be expected in the future
We believe that the core factors restricting the acquisition willingness of high-quality real estate enterprises deserve attention. 1. Confidence: the mortgage support has a certain sustainability, and the targeted interest rate cut is expected to alleviate the negative feedback expectation at the sales level; 2 leverage: Although there is no clear statement that M & A is not included in the three red line statistics, if the industry credit risk deteriorates further, it does not rule out the improvement of policy support, It even focuses on alleviating the concerns of high-quality real estate enterprises about the real debt ratio (such as the support of equity financing); 3 pre-sale fund supervision: it is worth looking forward to how to implement the “optimization of pre-sale fund management of acquired real estate projects” mentioned this time. In addition, China real estate news (official media of the Ministry of housing and urban rural development) recently issued a document to protect the market subjects “Local governments should deeply understand the benefits and disadvantages from the overall situation of stability and development, accelerate the implementation of various central policies, actively formulate and implement appropriate policies around the main needs of the real estate market in the real estate industry, and promote the virtuous circle to operate better and faster.”
Grasp the improvement of M & A on the left and concentration on the right
The future industry beta depends on the adjustment of industry structure, the pace of capacity clearing and the strength of policy support; Alpha focuses on the repair of the balance sheet and profit margin of key real estate enterprises by M & A, the accuracy of countercyclical plus leverage, and the long-term excavation of the value of housing scenarios. Suggestions: 1) high quality leaders: Gemdale Corporation(600383) , Poly Developments And Holdings Group Co.Ltd(600048) , rongchuang China, China Vanke Co.Ltd(000002) , Longhu group, China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) ; 2) High quality growth: Jinke Property Group Co.Ltd(000656) , Seazen Holdings Co.Ltd(601155) , Jiangsu Zhongnan Construction Group Co.Ltd(000961) , Xuhui holding group; 3) High quality property management: Country Garden service, xinchengyue service, Greentown service, China Merchants Property Operation & Service Co.Ltd(001914) , poly property.
Risk tips: macroeconomic fluctuations, policy implementation is less than expected, and the sales of real estate enterprises are less than expected
