In the current real estate industry, everyone is in danger, and many real estate companies experience thunderstorms. Of course, there are policy reasons and epidemic reasons, which are a double blow. Due to the financial investment nature of real estate, everyone buys up and not down. Once this market expectation is formed, it will make it even more difficult for real estate companies to sell. Therefore, due to the highly leveraged industry of real estate, in the current market environment, should focus on the quality of the company’s liabilities and assets, and whether the unrestricted cash flow can cover the maturing debt? Cash flow comes from sales receipts, so sales receipts should also be focused on.
For Vanke, the current market valuation price-to-book ratio of A shares is only 0.66. Therefore, the focus is on the quality of Vanke’s assets, especially whether there is a possibility of significant impairment of inventory? We know that Vanke’s land reserves are mainly in first- and second-tier cities. It should be said that its asset quality is still relatively high in the same industry, and Vanke’s interest expense capitalization rate is relatively low, and its water content is relatively low. Therefore, in general, there should be no possibility of significant impairment relative to peers. We still regard Vanke as a company that can continue to operate in the foreseeable future, and value it at replacement cost. In the balance sheet of the third quarterly report of 2022, the inventory item is 982.184 billion. Even if the inventory depreciates by 10%, it is about 98 billion depreciation. The total owner’s equity attributable to the parent company is 241.107 billion, so there are 143.1 billion left. It is not much different from the current market value of 158.6 billion. Therefore, my general view is that the current stock price has fully reflected the potential risk. Unless inventories depreciate more than we expected.
Now look at the debt and cash and so on. As of the third quarterly report in 2022, cash was 118.83 billion yuan, higher than the sum of short-term borrowings and interest-bearing liabilities due within one year of 62.75 billion yuan.
As at the end of the reporting period, the amount of interest-bearing liabilities was RMB 294.32 billion, of which 78.7% were long-term liabilities, representing an increase of 1.1 percentage points compared to the interim period. Bank loans accounted for 58.6%, bonds accounted for 26.6%, and other loans accounted for 14.8%. Unsecured and unsecured financing accounted for 96.1% of the total interest-bearing liabilities.
It can be seen that Vanke’s debt structure is dominated by long-term liabilities, with an interest-bearing debt ratio of 16%. Cash can fully cover short-term borrowings and interest-bearing liabilities due within one year, reaching 1.8 times. In addition, Vanke’s debt cost is relatively low among its peers, only about 4% overall.
Doubt, in addition to the contract liabilities, the current liabilities are paid for the house, and other such as the accounts payable are also quite large. What are they paid for? Seems to be running low on cash? Is it the balance of the sale of the house to pay the accounts payable? Therefore, the sales still have to go smoothly, or there is still insufficient cash on the account, and it is difficult to pay the supplier’s payment for the goods.
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