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China Overseas Land & Investment Ltd 00688 Stock Quote

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Morningstar‘s Stock Analysis 00688

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China’s 16-Point Plan in Support of the Property Sector; Full Recovery Expected To Take Time

Michael Wu, CAIA Senior Equity Analyst

Analyst Note

| Michael Wu, CAIA |

The Chinese government has over the past few days laid out plans to support the real estate sector, leading to sharp share price gains for the real estate developers. While we think the recent policy moves are in the right direction to assuage debt risks, we believe more is needed, which we hope will materialize over the next six months. We think the initiatives are supportive of the share prices in the near term, but we maintain our view that we need to see a return of homebuyers’ confidence to support contracted sales, as this is essential for a durable improvement in the developers’ credit environment. We think indebted developers may see a lag in the return of buyers’ confidence compared with that for financially stronger companies. At this stage, we maintain our view for revenue and profit to trough in 2023 for the sector, but we see financial positions improving during the year. The policy support doesn’t change our view that state-owned developers, such as China Overseas Land and Investment, or COLI, and China Resources Land, or CRL, should still be best positioned to pick up reasonably priced landbank given their stronger balance sheets, which gives them a competitive edge in future projects.

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Key Statistics 00688

Company Profile 00688

Business Description

China Overseas Land & Investment, or COLI, is a large real estate developer in China. Property development accounts for the majority of its core earnings, with operating scale at about three times the size of midsize peers by contracted sales. In addition to property development, COLI targets growth in its commercial property portfolio with a dual focus on offices and shopping malls for recurring income. The company is a subsidiary of China State Construction Engineering, China's largest construction company. COLI holds a 38% stake in China Overseas Grand Oceans, a real estate developer focusing on lower-tier Chinese cities.

1 Queen's Road East, 10th Floor, Three Pacific Place
Hong Kong, Hong Kong
T +852 29880666
Industry Real Estate - Development
Most Recent Earnings
Fiscal Year End Dec 31, 2022
Employees 5,692