China Resources Land Ltd is an attractive growth stock
30/03/2015 • About China Resources Land Ltd (
$1109) • By InTwits
China Resources Land Ltd is a growth stock in Real Estate industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
China Resources Land Ltd showed fast growth in the last financial year. The company's revenue surged on 25.7% in FY2014. Together with revenue growth China Resources Land Ltd also managed to keep EBITDA growth. EBITDA grew 15.8% for the same period.
If we look for the longer period the company showed fast revenue growth of 35.8% from 2011 to 2014 annualy. EBITDA surged on 22.3% from 2011 to 2014 annualy.
China Resources Land Ltd ($1109) financials for the last 5 years
| mln. HKD | 2010 | 2011 | 2012 | 2013 | 2014 |
|---|
| Revenue | 25,729 | 35,795 | 44,364 | 71,389 | 89,705 |
|---|
| Revenue growth, % | | 39.1% | 23.9% | 60.9% | 25.7% |
|---|
| Gross margin, % | 39.5% | 39.6% | 37.6% | 28.2% | 30.5% |
|---|
| SG&A, % | 6.91% | 10.3% | 8.36% | 5.50% | 5.94% |
|---|
| EBITDA | 11,814 | 15,271 | 17,879 | 24,112 | 27,922 |
|---|
| EBITDA growth, % | | 29.3% | 17.1% | 34.9% | 15.8% |
|---|
| EBITDA margin, % | 45.9% | 42.7% | 40.3% | 33.8% | 31.1% |
|---|
| Net Income | 6,005 | 8,121 | 10,569 | 14,696 | 15,141 |
|---|
| Net Income margin, % | 23.3% | 22.7% | 23.8% | 20.6% | 16.9% |
|---|
| |
| CAPEX | 1,693 | 3,697 | 5,289 | 7,033 | 13,573 |
|---|
| CAPEX/Revenue, % | 6.58% | 10.3% | 11.9% | 9.85% | 15.1% |
|---|
| Debt | 37,807 | 63,767 | 56,569 | 68,036 | 93,920 |
|---|
| Cash | 12,554 | 15,792 | 21,953 | 28,239 | 44,857 |
|---|
| Net Debt/EBITDA | 2.1x | 3.1x | 1.9x | 1.7x | 1.8x |
|---|
| |
| ROIC, % | 14.1% | 12.8% | 12.3% | 14.7% | 13.5% |
|---|
| ROE, % | 14.3% | 15.2% | 16.3% | 19.1% | 15.9% |
|---|
Profitability and return on investment
Despite revenue growth EBITDA margin declined slightly from 33.8% in FY2013 to 31.1% in FY2014. In the longer period EBITDA margin dropped on 11.6 pp from 42.7% in 2011 to 31.1% in 2014.
We call China Resources Land Ltd an attractive growth stock as together with the growth it delivers high ROIC at 13.5%. During the last three years it increased - it was 12.8% in FY2011. It's average ROIC for the last three years was 13.5%.
The company showed big decline in Net Income margin of 3.70 pp from 20.6% to 16.9% in 2014. If we look for the longer period China Resources Land Ltd's Net Income margin dropped on 5.80 pp from 22.7% in 2011 to 16.9% in 2014.
China Resources Land Ltd operates at ROE of 15.9%. It's average ROE for the last three years was 17.1%.
Capital expenditures (CAPEX)
To fuel this fast growth the company had to invest in CAPEX.In FY2014 the company had CAPEX/Revenue of 15.1%. The company's CAPEX/Revenue surged on 4.80 pp from 10.3% in 2011 to 15.1% in 2014. For the last three years the average CAPEX/Revenue was 12.3%.
Leverage (Debt)
Having such a fast growth profile the company keeps medium debt level at 1.8x Net Debt/EBITDA. If we look for the longer period China Resources Land Ltd showed big decline in leverage of 1.38x from 3.14x in 2011 to 1.76x in 2014.
Valuation vs. comparable companies
At the end of trading day today China Resources Land Ltd traded at 6.9x EV/EBITDA which is 69% lower than 22.4x Real Estate peer group avearge calculated on the basis of 185 companies. The market closed today at 9.6x P/E for China Resources Land Ltd which is 67.1% lower than 29.1x Real Estate peer group avearge calculated on the basis of 85 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The market closed today at 13.5x EV/(EBITDA-CAPEX) for China Resources Land Ltd which is higher vs. -6.4x Real Estate peer group avearge calculated on the basis of 65 companies.
Peers in Real Estate
Below we provide China Resources Land Ltd benchmarking against other companies in Real Estate industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| LVGEM China Real Estate Invest ($95) | | -0.1% | -27.5% | -21.9% | 3,008.3% |
| Rivera Holdings Ltd ($281) | | 222.2% | 197.1% | -89.9% | 2,067.2% |
| Rykadan Capital Ltd ($2288) | | -20.2% | -94.0% | 91.5% | 1,252.9% |
| Gemdale Properties & Investment Corp Ltd ($535) | | -78.5% | -36.0% | 43.2% | 831.0% |
| Hong Kong Ferry Holdings Co Ltd ($50) | | -30.3% | -3.0% | -28.6% | 696.6% |
| |
|---|
| Median (108 companies) | | 15.2% | 17.1% | 10.7% | 7.4% |
|---|
| China Resources Land Ltd ($1109) | | 39.1% | 23.9% | 60.9% | 25.7% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Tern Properties Co Ltd ($277) | 95.8% | 96.9% | 96.7% | 98.4% | 98.4% |
| GR Properties Ltd ($108) | 50.7% | 37.4% | 39.3% | | 98.2% |
| ITC Properties Group Ltd ($199) | 44.7% | 29.8% | 22.8% | 92.9% | 95.2% |
| Wah Ha Realty Co Ltd ($278) | 91.9% | 88.7% | 96.3% | 96.0% | 93.2% |
| Nanyang Holdings Ltd ($212) | 91.2% | 89.4% | 90.5% | 91.3% | 89.6% |
| |
|---|
| Median (99 companies) | 43.8% | 43.6% | 44.1% | 43.7% | 42.3% |
|---|
| China Resources Land Ltd ($1109) | 39.5% | 39.6% | 37.6% | 28.2% | 30.5% |
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| ITC Properties Group Ltd ($199) | 116.8% | 24.0% | -125.5% | -2,995.7% | 1,685.3% |
| Chinese Estates Holdings Ltd ($127) | -348.6% | 340.9% | 356.2% | 91.6% | 195.5% |
| Sino Land Co Ltd ($83) | 82.1% | 152.4% | 107.7% | 94.3% | 116.3% |
| Asia Orient Holdings Ltd ($214) | 659.0% | 229.8% | -82.0% | 141.6% | 112.0% |
| SOHO China Ltd ($410) | 48.0% | 113.8% | 113.6% | 80.8% | 104.0% |
| |
|---|
| Median (108 companies) | 35.2% | 37.6% | 34.1% | 30.2% | 29.2% |
|---|
| China Resources Land Ltd ($1109) | 45.9% | 42.7% | 40.3% | 33.8% | 31.1% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| ITC Properties Group Ltd ($199) | 13.6% | 25.6% | 56.2% | 4,202.4% | 1,304.7% |
| Wanda Hotel Development Co Ltd ($169) | | | 5.9% | 24.1% | 1,091.1% |
| Pacific Century Premium Developments Ltd ($432) | 4.2% | 6.5% | 2.9% | 323.1% | 351.2% |
| Liu Chong Hing Investment Ltd ($194) | 1.0% | 9.4% | 18.5% | 6.1% | 269.7% |
| Silver Grant International Industries Ltd ($171) | 19.3% | 100.8% | 134.5% | 193.1% | 204.1% |
| |
|---|
| Median (109 companies) | 5.3% | 7.6% | 7.7% | 8.3% | 5.7% |
|---|
| China Resources Land Ltd ($1109) | 6.6% | 10.3% | 11.9% | 9.9% | 15.1% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Rykadan Capital Ltd ($2288) | 43.3% | 17.2% | -1.8% | -2.6% | 48.4% |
| LVGEM China Real Estate Invest ($95) | 1.9% | 0.2% | -0.2% | -1.1% | 22.1% |
| Hong Kong Ferry Holdings Co Ltd ($50) | 6.6% | 4.7% | 3.8% | 0.6% | 18.0% |
| Redco Properties Group Ltd ($1622) | | 10.0% | 14.9% | 31.7% | 17.6% |
| China South City Holdings Ltd ($1668) | 17.9% | 14.0% | 15.2% | 15.9% | 15.9% |
| |
|---|
| Median (112 companies) | 4.5% | 4.6% | 3.8% | 4.0% | 3.5% |
|---|
| China Resources Land Ltd ($1109) | 14.1% | 12.8% | 12.3% | 14.7% | 13.5% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Cheuk Nang Holdings Ltd ($131) | | 53.2x | | 177.3x | 901.7x |
| Tian An China Investment Co Ltd ($28) | -0.0x | 2.4x | 13.2x | 15.1x | 486.6x |
| Coastal Greenland Ltd ($1124) | 11.2x | 4.2x | 2.2x | 7.1x | 26.6x |
| Shui On Land Ltd ($272) | 10.5x | 7.9x | 22.1x | 13.2x | 17.1x |
| Easyknit International Holdings Ltd ($1218) | -2.1x | -1.6x | -0.8x | 3.0x | 17.0x |
| |
|---|
| Median (90 companies) | 1.6x | 2.1x | 2.2x | 2.7x | 2.4x |
|---|
| China Resources Land Ltd ($1109) | 2.1x | 3.1x | 1.9x | 1.7x | 1.8x |
