Thinking Highly of the Super Powerful Executive Ability of Evergrande, Deutsche Bank Increases the Target Price of Evergrande to 5.0 HKD per Share

BEIJING, Nov. 4, 2010 /PRNewswire-Asia/ -- Sina Leju reports: On Nov. 3, the unit price of Evergrande Real Estate (3333.HK) shares rose to a large extent by 8.7% to 3.62 HKD, which is 200% compared with the lowest price in the same period of last year. Yesterday morning, Deutsche Bank released a report expressly indicating its opinion that Evergrande would have good development. Based on Evergrande's sales performance beyond the expectation and the recent upgrade in management, especially the super powerful executive ability, Deutsche Banks restated that it would give Evergrande the rating of "buy-in" and increased its target price from 3.6 HKD to 5.0 HKD per share. "We believe that Evergrande will consolidate its position as the leader of the industry due to it high-efficiency executive ability and huge scale. In addition, Evergrande has expanded its projects to 3rd-tier cities in the strategy, making its development perspective more and more remarkable. Moreover, the threat brought about by the compensation for privately raised investments before it is listed will end this Friday. We believe that the investors will focus again on the solid operation basis of Evergrande." Deutsche Bank is confident in the report.

It is indicated in the report of Deutsche Bank that as an ace in the transactions in the stock market, Evergrande mainly develops real estate in 2nd-tier and 3rd-tier cities as the key areas which are seldom impacted. It realized the sales amount of 35.6 billion yuan in the first three quarters of 2010. By maintaining its present sales speed and launching new projects, the contracted sales amount in the fiscal year of 2010 shall be able to reach 50 billion yuan (the target sales amount is 40 billion yuan). Therefore, the net asset value per share is increased from 5.55 HKD to 6.25 HKD.

Moreover, Deutsche Bank also says that Evergrande is the developer which develops real estate in 2nd-tier and 3rd-tier cities in the earliest time, so it has the advantage as a pioneer and it can purchase land at reasonable low costs. In addition, Evergrande has made proud sales performance from the beginning of this year till now even in the adversity of the industry impacted by policies, proving that its strategic perspective formulated at the early stage is successful. However, along with the increasingly fierce competition in 2nd-tier cities, Evergrande is adjusting its development priorities and pays more attention to 3rd-tier cities. Deutsche Bank believes that 3rd-tier cities will become the cause of Evergrande's development in the next step. In the coming few years, it is highly possible that it will become the new trend leading the development of the industry.

Deutsche Bank rebates the estimated net asset value per share of 6.25 HKD by 20% (the prior rate is 35%) as the target price of Evergrande, meaning that the PEs of 2010 and 2011 will be respectively 11 times and 9 times. "Our rebated target price indicates the high-efficiency executive ability of Evergrande and also indicates that the threat brought about by the compensation for privately raised investments before it is listed no longer exists." Deutsche Bank points out, "However, as the period for which Evergrande has been listed is quite short, its rebated target price is still higher than other leading enterprises. What is worth mentioning is that we hold the opinion that the high-efficiency asset turnover mode of Evergrande is perfectly adaptable to the present policy environment. For investors who are limited to buy in the shares of Vanko in the A-share market, the shares of Evergrande can be a pretty good choice."

Before this, international investment banks such as City Bank, Goldman Sachs, and Merrill Lynch in succession have thought highly of Evergrande, forming a consistent view which is rare in the international capital market. Within people's expectation, along with the sales performance, the price of Evergrande shares has been increasing all the way, without any trace of the influence of market regulation on other relatively small developers.

SOURCE Sina Leju

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