• Awaiting GBA announcement
• Pre-sales target well within reach
• Yield and valuations compelling

Proxy to the Greater Bay Area

We are positive on Agile Group Holdings Limited’s (Agile; 3383 HK) heavy exposure to the Greater Bay Area, given that structural improvements are afoot. As at 31 Dec 2017, Agile has ~33% of land bank (>11m sqm) in the Greater Bay Area (GBA), which we believe should be sufficient for around 3-5 years of development. Specifically, the group’s GBA presence is concentrated around satellite cities like Zhongshan and Huizhou, which should be supportive to prices. Prices (like those in Zhongshan) are already growing at a fast pace, which we believe is reflective of the increasing connectivity within the GBA.

Conservative Pre-sales Guidance Could Yield Upside Surprise

The group has set what we believe to be a manageable target of RMB110b of pre-sales in 2018, representing a growth of ~22.6%. This should be supported by ~RMB180-200b of saleable resources set aside for the year. As a result, the implied sell-through rate comes in at ~55%-61%, which should be achievable.

While some of Agile’s peers are projecting more aggressive gross sales, we believe that management could be selling projects that involve a smaller portion of JV/associates, thus explaining the apparent disparity. Also, based on the strong projected level of new starts and area under development for 2018, we believe that management’s eventual 2018 pre-sales could surprise on the upside.

The group has also set out a 3-year plan, which involves attaining 30% revenue growth per annum, with net profit margins at ~12%. This should be supported by the group’s ~RMB 600b worth of total saleable resources (based on our estimates).

Valuations Undemanding

Agile is currently trading at 6.9x FY18F P/E, which is 6.8% below the market-cap weighted average of 7.4x. We have ascribed a target FY18F P/E ratio of 7.7x, which is 0.5 S.D. above its 10-year mean.

In our opinion, this slight premium is justified due to the potential rerating from its GBA exposure, yet tempered with conservative expectations of sales traction in Hainan, on the back of recently enacted property cooling measures. Thus, we initiate coverage on Agile with a FV estimate of HK$17.00, and a FY18F dividend yield of 6.6%.

Source: OCBC Research - 30 May 2018