CSI Properties:Some small catalysts

Disposal progress of the Platinum should be the key.

CSI’s upcoming 2 high-end resi launches in 2H15 could potentially benefitfrom recent stock market rallies and resilient housing demand fromupgraders. CSI’s profit is also set to rebound sharply in FY16CL, with30% of net profit now locked in. Stock re-rating, however, may take timeuntil more progress is made on the disposal of Shanghai Platinum andwhen the remaining 70% of FY16 earnings become more visible. Werevise up our target price to HK$0.33, from HK$0.28 and maintain O-PF.

Results highlight.

CSI’s FY15 (Mar-end) net profit came in at HK$262.9m, down 68% YoY andwas well-expected due to a lack of bookings from property disposals. In FY15,it booked the sale of Macau Ginza Plaza retail shops (HK$288m), GoldenCentre (HK$665m) and 22/F AXA Centre (HK$288m); against a HK$2.37bn indisposal proceeds in FY14 from the sale of 703 Nathan Road (HK$1.0bn), H8(HK$668m), and 2 units of Hampton (HK$160m). Net gearing is 17% atMar15, vs 4.4% at Mar14 after acquiring 5 projects during the year.

Looking forward to FY16.

CSI’s profit is set to rebound to HK$1.6bn in FY16CL, 30% of net profit hasnow been locked in from the presale of the yoo Residence (90% presold) andsale of the Henan Building. Another 65% is expected from the disposal of theShanghai The Platinum project, with one property fund already indicatinginterest. Kau To Highland (20 villas in Kau To Shan) and Queensgate Ph1 (100villas in Shanghai Qingpu) will also launch for sale during FY16.

Proactive landbank replenishments.

The company has made solid progress in landbank replenishment, added oneoffice project in Kowloon East (for sale, 30% stake) and two luxury residentialprojects namely Fan Kam Road at Sheung Shui (100%) and Po Shan Road atmid-levels (20%) in YTD FY16. These acquisitions bring additional 10% upliftto our NAV estimate, and extend its project pipeline to 2020.

Maintain Outperform with revised TP.

We revise 16/17CL earnings by +16%/-26% to reflect the latest disposalschedule for major projects (bookings of AXA Centre delayed to 17CL,Platinum advanced to 16CL). We also rolled forward to FY16CL with our targetprice revised to HK$0.33, from HK$0.28, based on a 70% NAV discount(unchanged).