CIFI:Solid 1H17results

Impressive 1H17 results.CIFI’s 1H17core profit rose 62.2%YoY to RMB1,538mnon increase in booked property salessupported by 1.7%YoY growth in GFA delivered and a 30.4%YoY ASP hike. Suchresults shouldnot present too much of a surprise to the marketsinceCIFI has issued a positive profit alertearlier. CIFI's gross margin, which rose 4.6ppt YoY to 31.6%, wasbetter than expected.Management commentedthat gross margin is likelyto exceedits previous guidance of 25%fornextfew years given 1H17 presales ASP of RMB18.4k/sqm is 27% higher than the booked ASPfor the same period. Onthe balance sheet side, net gearing rose 8.9ppt HoH to 59.3%since CIFI’s land capex amounted to RMB20.9bnin 1H17 on an attributable basis.Average finance cost decreasedby 50bps HoH to 5.0% in 1H7, only slightly higher than the SOE players (e.g. Jinmao:4.59% in 1H17). CIFI declared an interim dividend of HK5cents, implying aninterim yield of ~1%.

New share placement strengthensbalance sheet position.In July, CIFI issued 545mn and 135mn of new shares to Ping An and various investors at HK$3.50 (at 13% discount) and HK$3.82 (at 5% discount) to raise HK$2.4bn. Theplacementhasstrengthenedthe Group’s balance sheet position. Moreover, Ping An, now a strategic investorholding a 9.94%stake in CIFI post-transaction,will explore different opportunities in the property market withthe Group. Ready to gear up for more land acquisitionsin 2H17.In 7M17, CIFI acquired 45projects with a total GFA of 6.0mn sqm at RMB53.5bn(RMB30.1bn on an attributable basis). About 39% of the land acquisitionwassecured via M&Athat allows installments over a longer period. As of June 2017, CIFI hadan outstandingland premium of RMB9.4bn, compared to RMB5.9bn a year ago.Management expectsmoreland acquisitions totake place in 2H17 andis ready to gearup to 70-80% level.As of June 2017, CIFI hada landbank of 22.1mn sqm with an average cost of RMB5,800/sqm.

Presaleto reach RMB300bn by 2021.In 1H17, CIFI’s presalerose 71%YoY to RMB 47.1bnor 66%YoY to RMB25.4bn on an attributable basis. Thefive major tier-1/2cities, Shanghai, Beijing, Suzhou, Hangzhou and Chongqing, accounted for 19%, 16%, 15%, 10%, and 7% of total presales, respectively.(Continue next page)