News Alert: Positive profit alert hinting a set of better than expected interim results
- CR MixC announced positive profit alert after market close on Friday, stating that it expects 1H22 earnings to grow by 25-30% y-o-y
- We believe this comes in above us and market’s original expectations, and hints that potential impact from rent relief could actually come in better than expected
- Along with CR Land’s unveiling of solid recovery in both presales and retail sales performance, we believe the counter should see decent rebounds from Friday’s sell-off
- We have a BUY on the counter with TP of HK$45.22
What’s new?
CR MixC (1209 HK, BUY) released positive profit alert after market close on Friday, stating that it expects the company’s 1H22 earnings to grow by c.25-30% y-o-y.
Our view
Hinting for a better than expected set of 1H22 results ahead. We believe the market originally did not hold strong expectations on CR MixC’s interim results as 1) business operations and thus P&L will likely be affected by COVID-19 lockdowns in 2Q22; and 2) impact from reflection of rental concessions. The company’s expectation of a 25-30% growth stated in its positive profit alert will therefore likely serve as an upside surprise to the market.
Impact from rent relief may come in better than expected. Parent developer CR Land (1109 HK) currently estimates the potential size of rent relief to range at Rmb2.2bn-Rmb2.5bn, majority of which (c.Rmb1.75bn or 70-80% of the full impact) to be recognized in 1H22. We believe CR MixC will be reflecting the impact from rental concessions at the same rate as its parent. Alongside the better than expected growth magnitude in 1H22 earnings, we believe this may hint that the impact from rental concession on CR MixC could come in better-than-expected and indicates upside risks to our current earnings estimates that factors in a relatively conservative scenario for our FY22 earnings (please refer to China Resources MixC Lifestyle Services: Poised to break out from COVID-19 for details).
Supportive to share price performance. On one hand, interim results will likely come in better than original expectations as hinted from the positive profit alert. On another, uncertainty over impact from rental concessions is clearing and CR Land is recording solid recovery in both presales and retail sales per its disclosure of June operational statistics on the same evening – which are critical factors that drives CR MixC’s share price. We believe these will help to drive a round of share price recovery for the counter after the sell-off witnessed on Friday amid fears over the release of potentially worse-than-expected operational statistics by CR land and a larger than expected rental concession plan. We have a BUY on the counter with HK$45.22 TP.