Encourage the use of M & A loans, raise the financing ceiling of high-quality real estate enterprises, and enhance their ability to withstand the cold winter of the industry.
In December 2021, the central bank and the China Banking and Insurance Regulatory Commission issued a document to encourage high-quality real estate enterprises to strengthen the acquisition and merger of real estate projects in accordance with the market-oriented principle, make a breakthrough in the “three red lines” of M & A financing, encourage financial institutions to provide financial services for M & A and promote the liquidation of the industry. We believe that the industry structure optimization brings about the expected adjustment of the competition pattern. The prediction of “survivors” of real estate enterprises has changed from only state-owned enterprises to high-quality state-owned and private enterprises, and then to medium and high-risk enterprises. The expected changes in the industry competition pattern drive the valuation of some private enterprises to return to a rational range.
The property fundamentals are good, and the withdrawal of valuation mostly stems from the concerns of related real estate enterprises.
We believe that the reasons for this round of comprehensive correction in the valuation of the property sector are as follows: 1) medium and high-risk real estate enterprises are facing the risk of breaking the capital chain, and the market is worried that the property company will become a financing tool for the parent company; 2) The sales end of real estate enterprises is generally down. The market has doubts about the independent development ability of property enterprises and is worried that the scale and performance of property enterprises will decline. We believe that many listed property management enterprises have solid market-oriented development ability, and their dependence on affiliated real estate enterprises has decreased year by year. According to our statistics, among the listed property enterprises with the top 15 management area in 21h1, 7 third parties account for more than 50% of the management area, and the third parties of property companies such as Greentown service and Xuhui Yongsheng service account for more than 80%, which has a strong independent development ability.
The frequent positive capital has boosted market confidence, and the property value has returned to the rational range.
Since the beginning of 2022, relevant news about M & A loans of real estate enterprises has been issued one after another, and industry policies encourage M & A in the industry. We continue our judgment on the property sector in the annual strategy: with the continuous progress of real estate policy correction, the liquidity risk of high-quality real estate enterprises will be gradually resolved, market confidence will be encouraged, and the valuation of the property sector is expected to open the door of valuation repair with real estate enterprises. For details, see the industry report “Rethinking industry investment opportunities from the end” issued on December 23, 2021.
Investment suggestion: optimistic
We believe that the valuation repair path of property enterprises is similar to that of real estate enterprises. We suggest paying attention to: 1) central enterprise property companies with high safety margin: Poly property, CNOOC property, China Resources Vientiane life, China Merchants Property Operation & Service Co.Ltd(001914) ; 2) Private property management enterprises with high corporate governance independence and strong third-party expansion ability are manifested in the introduction of war investment to optimize the governance structure and the high proportion of the third party in the management area. It is suggested to pay attention to: Jinke service, Xuhui Yongsheng service, country garden service, etc; 3) The industry risk is further alleviated, and the over falling property enterprises have valuation repair opportunities. It is suggested to pay attention to: rongchuang service, Shimao service, xinchengyue service, etc.
Risk tip: tightening of industrial control policies and macroeconomic downturn
