2013 EPS at Rmb0.75, beating expectations by 16%

In 2013, revenue climbed 29.1% YoY to Rmb4.51bn, and net profit was up 39.1% YoY to Rmb1.41bn, or Rmb0.75/sh. 2013 EPS beat expectations by 16% as more projects were delivered.

Stronger-than-expected property booking: Contract sales totaled Rmb2.9bn and sales GFA was 110,000sqm. Property booking revenue surged 122.3% YoY to Rmb1.32bn.

Rental and service revenue grew steadily, as expected. Property rental revenue climbed 21.2% YoY to Rmb1.43bn. Grade-A office buildings, shops and apartments contributed revenue of Rmb1.05bn, Rmb220mn and Rmb125mn respectively with occupancy rates at 95.9%, 98% and 95%. Property management revenue jumped 28% YoY to Rmb506mn. Hotel revenue shrank 5% YoY to Rmb116mn due to economic slowdown.

Investment gains surged 102.7% YoY to Rmb520mn.

Net gearing ratio largely stable: Net gearing ratio was 32.6% at end-2013. Cash at hand spiked 136.2% to Rmb3.14bn.

Trends to watch

The company's business transition efforts have started to pay off. We expect annualized rental revenue growth to stay at ~15% thanks to the completion of the Tangdong project. Future booking will rely only on Lujiazui Mansion and Haishang Huayuan in Tianjin because the company has already sold out the high-margin Lujiazui Garden phase I and Hanheyuan's last phase. Sales growth in 2014 hinges on Pujiangzhen. We expect the company's earnings to grow slightly in the near term.

Earnings revisions

We lift 2014e EPS by 14% to Rmb0.77, and introduce 2015e EPS of Rmb0.83. Our 2014 NAV estimate is Rmb16.17/sh.

Valuation and recommendation

Lujiazui-B is still trading at an attractive 45% discount to our NAV estimate. We maintain a BUY rating.

Risks

Downside risks in macro economy.