Yuzhou Properties : 01628.HK) Grows with Quality BOCI Raises Target Price to HKD6.20

[For Immediate Release] Yuzhou Properties (01628.HK) Grows with Quality BOCI Raises Target Price to HKD6.20

(13 September 2017, Hong Kong) One of China's top 40 real estate enterprises, Yuzhou Properties Company Limited ("Yuzhou Properties" or the "Company"; together with its subsidiaries, collectively the "Group"; stock code: 01628.HK) targets to achieve RMB100 billion of contracted sales by 2020, translating to 44% 2016-20E CAGR. In the view of BOCI, with its solid progress in enhancing market positions in key economic regions, over 10 million sqm land bank and c.RMB200 billion of potential saleable value, Yuzhou Properties is on track to deliver on its goal. More importantly, due to its high profit margin and decent asset turnover, BOCI expects the growth to translate to over 20% ROE for 2017-19 with relatively low leverage. Reiterates its BUY rating on the stock, and raises target price to HKD6.20.

High Growth, High Returns

BOCI lifts its 2017 contracted sales estimate in the model from RMB30 billion to RMB40 billion, following management's adjustment in its target. The company has already achieved RMB24.2 billion of contracted sales in 7M17, completing 60% of the new target, and representing 63% year-on-year growth. With RMB35.8 billion of saleable resources available in 2H17, of which 76% is new launches, BOCI believes Yuzhou Properties is on track to achieve RMB40 billion of contracted sales.

Yuzhou Properties has accumulated pre-sold but unbooked revenue of over RMB30 billion by end-1H17, which equals to 80% of its 2H17E plus 2018E revenue. As such, BOCI lifts its 2017- 19E EPS by 3.0%, 7.6% and 6.2%, respectively, to RMB0.67, RMB0.89 and RMB1.12.

Ample Land Reserves, Low Debt Ratios

Reasonable land replenishment was carried out in 1H17 with c.1.1m sqm new land acquired, similar to the GFA sold in the period. Yuzhou Properties further enhanced its exposure in pan Bohai Rim and Pearl River Delta by buying new projects in Tianjin, Huizhou and Dongguan so far this year. Net gearing remained at 72.6% after the acquisitions, similar to 2016's level.

BOCI believes the Company's gross margin can remain at 33% or above in the next three years,

as the gross margin of its unbooked revenue, as well as current contracted sales are both over 33%.

Attractive Valuation, Reiterated BUY

Given 33% higher contracted sales forecast, BOCI lifts its estimated NAV by 30% to HKD10.33/share. Considering its lower risk and the recent rerating of the China property sector, BOCI narrows its target discount to NAV to 40%, and lifts its target price to HKD6.20. The stock currently trades at 1.1x 2018E P/B, 52% discount to NAV, and 8.2% 2018E yield. BOCI thinks such valuation is attractive given its superior ROE and fast growth. Reiterates BUY rating.

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Yu zh ou Prop er ti es Co mpany Li mi ted ( 0162 8. HK)

Established in 1994, Yuzhou Properties is a property developer headquartered in Shanghai with a national foothold. Adhering to its strategy of Cultivating in Regions Leading the Market, Yuzhou Properties strives to develop residential and commercial properties which align with market trends in first-and second-tier cities. As at 30June2017, the Company had 79projects under various stages of development in Xiamen, Fuzhou, Shanghai, Tianjin, Nanjing, Hefei, Hangzhou, Suzhou, Quanzhou, Zhangzhou, Longyan, Bengbu and Hong Kong. It had a over

9.54 million sq.m. in aggregate GFA under development or held for future development, with Yangtze River Delta Region, West Strait Economic Zone, Bohai Rim Region and Central Region accounting of 54%, 35%, 5% and 6% respectively, of the total. Renowned for its outstanding product quality, diversified product portfolio, strong brand awareness and seasoned management team, Yuzhou Properties has been named "Top 100 China Real Estate Enterprises" for eleven years in a row; and Top 50 China Real Estate Enterprises from 2011 to 2017.

For more information about Yuzhou Properties, please visit the Company's website: http://www.yuzhou-group.com

For inquiries, please contact:

Yuzhou Properties Company Limited (HKEX: 01628)

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Wonderful Sky Financial Group Holdings Limited (HKEX: 01260) Iris Au Yeung/ Mel Lai

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