High Yield Chinese Property

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1、HighYieldChinesePropertyInitialOpinion-CreditGlobalEmergingMarkets

2、CorporateCredit

3、Asia

4、China25April2013SuccessfulevolutionAlwynPang,CFA+85225363485ResearchAnalystMerrillLynch(HongKong)¢Trackrecordfromindustry,issuersandthebondmarketalwyn.pang@baml.comWebelievetheFY12resultsandthenewi

5、ssuedynamicsinthepast12monthsJoyceLiang+85225363817ResearchAnalysthaveaffirmedacontinuingoverallimprovementintheChinesepropertysector.MerrillLynch(HongKong)joyce.liang@baml.com(1)Industry’sgrowthmomentumstabilizedat10-15%pain2010-12amidaGEMSCorporateStrategytighteningbiasregulatorybac

6、kdrop.Weexpectthetrendtocontinuein2013.MLPF&S(2)Issuersbalancegrowthversusbalancesheetbetter-Issuers’netgearingfellto59%atend-12from126%atend-08,andaveragecontractedsalesgrowthof27%pacomparesfavorablytoindustry’s12%pain2010-12.(3)Morenewissuesarebeingusedforrefinancingandthussectormat

7、urityprofileisextendedandfinancingcostislowered.Themarketsize(US$issuances)increasedfromUS$4bnatend-09toUS$32bncurrently.(4)Existingissuersdominatepipelineasdebutissuersonlyaccountedfor12%ofthesupplyin2013YTDversus66%in2010.Thefactthattherearemoremulti-issuancesissuersreflectsthelower

8、refinancingriskinthesector.Keyrecommendationsinaportfoliocontext:(1)YTCofcallablebondsin‘14/’15stillhasvalue:OW-30%inCOGARD’17/’18,SHIMAO‘17/’18andKWGPRO’16/’17.YLLG’17/’18(UW-30%)istheexceptionasitoffersnomeaningfulpick-upagainstthemoreestablishedissuerslikeCOGARD/SHIMAO.(2)Scarcityv

9、alueinthebellyofthecurveasmorebondsdue2017-18arelikelytobecalledin2014-5.Inlargerdevelopers,wepreferAGILE‘17/’17NandLNGFOR’19(allareOW-30%),andGEMDAL’17(upgradedtoOW-70%).Insmallerdevelopers,welikeKWGPRO’17N,YUZHOU’17,KASIAG’17,andROADKG’17(allOW-30%),aswellasKAISAG’18/’20(OW-70%).(3)

10、UWhighbetalargerdevelopers:TheweakeningcreditprofileofEVERREDavid.Bussmann@asiamezzanine.com.coincideswithitsneedstocommenceamajorrefinancingexerciseandthusbargainingpowerrestswithinvestors(UW-30%inEVERRE’15/’16).WealsoviewthatthenewdealfromEVERREmightputpressureonSUNAC’18(UW-30%).Val

11、uatio