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AS THE property sector in China recovers, DMG & Partners Securities has raised its target price for Pan Hong Property Group to 50 cents per share, from 43 cents previously.
Maintaining a 'buy' call on the counter, DMG analyst Brandon Lee said in a research report last Friday that Pan Hong's management 'is now seeing more concrete signs of recovery and improved buying sentiments in lower-tier cities'.
The new fair value takes into account the higher-than-expected prices on the 16 units sold for its new Hua Cui Ting Yuan project. In the past two months, Pan Hong also sold 240 units from three existing projects in China.
Recently, the group also acquired a 226,102 sq m site at the Dushan Port area in Zhejiang province's Pinghu city for 47.5 million yuan (S$10 million). The site is connected to Shanghai's largest oil and petrochemicals port, Jinshan Port, where China's oil reserves base, the Shell Group and other global petrochemical companies are located.
'We believe Pan Hong has again demonstrated its ability to secure prized assets at comparatively attractive costs,' the DMG report said.
Pan Hong's management intends to focus its property development business on lower-tier cities in South-eastern China, where it has built up a strong brand in the past 20 years and where there are better opportunities to acquire land cheaply, the report said.
At present, it has a landbank of 2.4 million sq m across five cities, which DMG says, should ensure healthy medium- to long-term profits.
Its balance sheet too, remains strong, with a net gearing of 0.17 times.
To increase Pan Hong's recurring income, the management is also raising its asset portfolio's exposure to investment properties. It has 18,139 sq m of commercial properties at the moment, with another 64,465 sq m in the pipeline.
Pan Hong closed three cents up at 41 cents last Friday.
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