News Alert: Rental concession plan landed at an amount in-line with expectations
- CR land unveiled that their rent relief plan for tenants is estimated to range at Rmb2.2-2.5bn, which came in-line with our expectations
- Despite majority of the impact to be fed through in 1H22, we believe the company should still be able to deliver flat to slight y-o-y decline in earnings growth
- Uncertainty on the counter should have cleared with improving operational performance; Maintain BUY and it being one of our sector top picks.
What’s new?
CR Land (1109 HK) announced after market close on Friday that they are voluntarily offering rental relief of Rmb2.2bn-2.5bn to support their tenants through current times of operational difficulties.
Our view
Preliminary rent relief comes in within expectation. The counter has long been shadowed by the uncertainty relating to the potential amount of rent relief that will be offered in response to SASAC’s calls to support small and micro enterprises upon operational struggles stemmed from COVID-19 lockdown measures. The announced rental relief that CR Land plans to offer for its tenants would represent c.1% of our estimated FY22F revenue on the company or c.4% of FY22F earnings, which comes pretty much in-line with our expectation (see China Property Sector: Are landlords in harm’s way from COVID-19 lockdowns? for our analysis back in May-22).
Majority of the rental concession to be recognized in 1H22, but interim result should nevertheless remain largely stable. CR Land also released its presales and monthly rental income statistics for June-22, with its gross rental income in 1H22 down 5.5% y-o-y as c.Rmb1.75bn of rent relief (of the total amount of Rmb2.2-2.5bn) was recognized in June. Despite this, we believe CR Land should still be able to maintain flattish to a slight decline in 1H22 earnings despite a high comparison base in 1H21.
Solid recovery in retail sales and presales. CR Land’s monthly presales reversed its declining trend in June with a 2.5% y-o-y growth despite a high comparison base in Jun-21. Same store retail sales growth continued its recovery pace and rose 11% y-o-y. Notably, same store retail sales for high end luxury items picked up at a faster pace of 17%.
Overhang removed alongside decent recovery in operational statistics. We believe uncertainty surrounding CR Land relating rental concession has finally cleared, with solid recovery both in its presales and retail sales performance. We continue to have a BUY on CR Land and it being one of our sector top picks to ride on supportive policies to come and physical market recovery ahead.
