In July, real estate companies have announced the “mid-term examination” transcripts. Although the vast majority of listed real estate companies in the first half of the sales are growing, but the stock price is still “falling”. According to the statistics of Leju Institute of Finance and economics, in the first half of 2021, the total market value of 170 listed real estate enterprises decreased by about 340 billion yuan, or 8.7%. Among them, the market value of 118 declined, accounting for 69.4%. Only 50 rose, while 2 remained flat.
Is it because the house is hard to sell that investors revalue the value of real estate stocks? According to the shell Research Institute, in the first half of this year, the transaction volume of new houses in 50 key cities in China was the highest since 2016. Compared with the same period in 2020, the growth rate of many real estate enterprises is 34%.
Why is it that the capital market is still not optimistic despite the “three to five dues” in excess?
For investors, the safety of investment is the first. To be sure, real estate sales are still growing, but liabilities are growing faster and profits are falling faster. The latter two are decisive for the recovery of investment. In the first half of the year, the real estate enterprises whose market value fell by more than 30% were the ones with debt repayment problems, such as Taihe (- 33.95%), Blu ray (- 36.29%) and Huaxia happiness (- 59.47%). In other words, in the capital market, investors not only look at the long board of the barrel, but also do not allow listed companies to have too obvious short board.
For investors, scale is no longer important, safety is the key. Therefore, we can see that the market value of Longhu, which has been hovering around the 10th place in the sales list for a long time (the sales volume in the first five months was about 111.83 billion yuan), is about twice that of China Evergrande (the sales volume in the first half of the year was 356.79 billion yuan).
Longhu is favored by investors, not because it has any advantages, but because it has few disadvantages. The growth rate is stable (the annual sales growth rate is about 10%, which belongs to the middle class), the debt ratio is low (the net debt ratio is only 46%), the profit is stable (the core tax profit margin is 14.7%), and more importantly, the cash flow is abundant (the cash to debt ratio is more than 4 times). A safe and sustainable growth enterprise is the most popular one in the capital market.
Needless to say, the decline of real estate stocks is related to the low growth of the industry, the high overall debt ratio and the decline of profit margin. If you want to avoid these adverse factors, the best way is to cross the circle. The successful real estate enterprises will also be favored by the capital.
The listed company with the highest growth rate was aoyuanmeigu, with a growth rate of 189.47% and a market value of 17.186 billion yuan (June 30). Aoyuan Meigu is a subsidiary of China Aoyuan, a leading real estate enterprise. The latter is a 100 billion (sales scale) real estate enterprise, but its market value is only more than 10 billion yuan. The main income of aoyuanmeigu is still real estate, but recently it has focused on medical beauty, so the stock price has soared all the way.
A consensus is that real estate development may be a sunset industry, but the residential related industries are becoming a sunrise industry. Property management is one of them, its industry valuation is far higher than the main business of real estate sales. The most typical example is that the market value of country garden service once exceeded that of its parent company country garden. In addition to property, business, leasing (including long-term rental apartments), real estate agency, home decoration, etc. have become new areas for real estate enterprises. Taking Longhu Lake as an example, the so-called six “main channels” have been formed. In other words, it regards the related sub sectors as equally important industries as the main industry (residential development). This is also the internal logic of its rising market value – the increment of houses may not be much, but the stock is getting larger and larger, and there will be more and more housing related services and consumption.