Morningstar

Morningstar, Inc.

Equity Bottom-Up

Soho China reported full-year 2018 results slightly below our expectations. Rental turnover and gross profit were down 1% and 9% year on year, respectively. The margin compression was likely due to slightly lower occupancy and opening expenses. The company declared a final dividend of CNY 0.030 per share.We maintain our fair value estimate of HKD 3.40 and our no-moat rating. Operationally, the portfolio’s performance was reasonable. However, the company’s strategy seems to be moving back to that…

Since announcing subdued interim results in August, Soho China’s shares have fallen more than 15%, in line with high beta names in the Chinese property sector. The government’s ongoing deleverage effort has led to some liquidity concerns for the more highly geared or smaller developers. However, recent policies pointing to a possible relaxation of property sector measures may boost market sentiment. Further, the company’s risk profile as the owner of investment properties is different from other…

Soho China reported half-year 2017 results in line with our expectations. Excluding revaluation gain and disposal gain, core earnings were estimated to be CNY 129 million, compared with our full-year estimate of CNY 240 million. For the rental segment, performance was subdued, with turnover and gross profit up 4% and down 1% year on year, respectively. The spin-off of the 3Q business is expected to be the next driver to unlock value in the company. However, the company did not separately…

Soho China recently indicated that it is aggressively expanding 3Q, its coworking space offering. The company stated that it has 30,000 seats as of early 2018 and is targeting 50,000 by the end of the year. The company is looking to spin off 3Q through a separate listing sometime in 2019. However, the profitability of the company’s coworking business is unclear at this point. In addition, the company is still seeking to dispose of Tianshan Plaza, which may unlock some value through a special…

Soho China reported full-year 2017 results in line with expectations. Rental turnover and gross profit were up 11% and 12% year on year, respectively, with margin edging up slightly. The increase was attributed to higher rental income as the rental portfolio continues to mature. During the year, the company declared two special dividends totaling CNY 0.922 per share, with no further year-end dividend. Both special dividends were funded by proceeds from asset disposals. We expect one more asset…

China

Soho China Ltd. is a property developer. The Company develops properties in central Beijing and Shanghai. Soho China collaborates with internationally recognized architects, translating their designs into real estate which possesses strong appeal to property investors and the local businesses and customer bases they serve.

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