Daiwa started CIFI Holdings at Buy with a target price of HK$8.08, saying the Chinese property developer has the potential to become a top-10 player.
“We believe that CIFI has already overcome challenges associated with a humble beginning and a smaller equity base, now that it has established a major presence in many major upper-tier cities, and built a landbank and the human resources to increase its market share in the years ahead,” Daiwa said in a note dated Monday.
“We view CIFI as an upcoming major player and see scope for its valuation to improve further,” it said.
It noted CIFI was among the few China property players to record at least 35 percent on-year growth in annual contract sales since 2011, with 2011-17 compound annual growth rate (CAGR) for sales at 64 percent, among the sector’s highest. Over 2018-20, Daiwa said it forecast annual sales growth of more than 35 percent.
CIFI shares are trading at a 46.5 percent discount to net asset value (NAV) and 6.9 times 2018 price-to-earnings ratio (PER), compared with peers’ average 44.7 percent NAV discount and 7.5 times PER, Daiwa said.
The stock’s valuation appears undemanding if it succeeds in becoming a top-10 player in China, Daiwa said, noting that due to the “very large gap” between the market caps of large China property players and the smaller ones means only a small fund shift from large-cap names to CIFI would drive a valuation improvement.
The stock ended Tuesday up 4.59 percent at HK$6.38.