Sino-Ocean Group Holding Limited's (Sino-Ocean; 3377 HK) 1H18 results came in broadly within our expectations.

The group saw revenue decline 10.9% YoY to RMB15.4b, largely because of the timing of revenue recognition of property development projects. Against FY17, the group's gross profit margin softened from 24.5% to 23.5%.

Excluding one-off items and fair value gains on investment properties, the group's core PATMI increased by ~1.3% YoY to RMB1.5b, which constitutes 31.6% of our full-year forecast (1H17 was 37.8% of full-year core profit). SinoOcean's net gearing ratio has seen a marked increase from ~62% as of end-FY17 to ~76% as of end-1H18.

We note that the group has acquired 39 plots of land and 1 developed project in 1H18, with attributable interest GFA of 3.1m sqm at an average acquisition cost of RMB9.3k psm.

We maintain our BUY rating for now, but put our fair value of HK$6.34 under review.

Source: OCBC Research - 23 Aug 2018