According to Cushman & Wakefield, among major Chinese cities, Beijing has the most retail space on a per capita basis. However, even with the projected growth from ~0.58 sqm to ~0.73 sqm by 2013, Beijing’s retail space per capita will still be half that of HK’s, which is at 1.4 sqm. As explored in our report dated 28 Jun, we believe that CRCT’s malls in Beijing, where four of its nine malls are located, have good locations and will do well despite the overall growth in retail space supply. Recent news reports regarding increased inventory pile-ups for certain retailers have caused some people to doubt official retail sales figures. Our analysis shows that while more companies are facing revenue contractions, revenues are climbing overall. Companies should be able to support continued rental increases. We maintain our BUY rating on CRCT and our fair value of S$1.70.
Room for more retail space
According to Cushman & Wakefield, among major Chinese cities, Beijing has the most retail space on a per capita basis. However, even with the projected growth from ~0.57 sqm to ~0.73 sqm over 2010-2013, Beijing’s retail space per capita will still be half that of HK’s, which is at 1.4 sqm. As explored in our report dated 28 Jun, we believe that CRCT’s malls in Beijing, where four of its nine malls are located, have good locations and will do well despite the overall growth in retail space supply.
Golden Week numbers
The Mid-Autumn Festival (30 Sep) this year coincided with the seven-day Golden Week holiday (1 Oct-7 Oct) to give an eight-day break. It has been reported that overall retail sales in China grew 15% to reach RMB800.6b during the National Day holiday. In comparison, overall retail sales grew by 17.5% YoY during the seven-day Golden Week last year. The 15% YoY growth rate this year may have been distorted slightly upwards by the longer holiday period.
Reconciling media news with sales growth
Recent news reports regarding increased inventory pile-ups for certain retailers have caused some people to doubt official retail sales figures, e.g. official figures show that China's retail sales rose 13.2% YoY in Aug. To get a better picture, we compared 36 consumer companies’ revenue growth for 1HCY12. We have organized nine subsectors by order of descending growth: Alcoholic beverages (+25%), Department stores (+22%), Snack foods and beverages (+17%), TCM (+16%), Supermarkets (+11%), Dairy products (+9%), Fashion and apparel (+8%), Eateries (+6%), Home appliances (+3%). On an average basis, we estimate that retail sales grew by 13% YoY in 1HCY12. More companies (8) reported YoY shrinkage of revenue in 1HCY12 versus the two previous periods, 2HCY11 (3) and 1HCY11 (2). Essentially, while more companies are facing revenue contractions, revenues are climbing overall. Companies should be able to support continued rental increases.
Maintain BUY
We maintain our BUY rating on CRCT and our fair value of S$1.70.
According to Cushman & Wakefield, among major Chinese cities, Beijing has the most retail space on a per capita basis. However, even with the projected growth from ~0.57 sqm to ~0.73 sqm over 2010-2013, Beijing’s retail space per capita will still be half that of HK’s, which is at 1.4 sqm. As explored in our report dated 28 Jun, we believe that CRCT’s malls in Beijing, where four of its nine malls are located, have good locations and will do well despite the overall growth in retail space supply.
Golden Week numbers
The Mid-Autumn Festival (30 Sep) this year coincided with the seven-day Golden Week holiday (1 Oct-7 Oct) to give an eight-day break. It has been reported that overall retail sales in China grew 15% to reach RMB800.6b during the National Day holiday. In comparison, overall retail sales grew by 17.5% YoY during the seven-day Golden Week last year. The 15% YoY growth rate this year may have been distorted slightly upwards by the longer holiday period.
Reconciling media news with sales growth
Recent news reports regarding increased inventory pile-ups for certain retailers have caused some people to doubt official retail sales figures, e.g. official figures show that China's retail sales rose 13.2% YoY in Aug. To get a better picture, we compared 36 consumer companies’ revenue growth for 1HCY12. We have organized nine subsectors by order of descending growth: Alcoholic beverages (+25%), Department stores (+22%), Snack foods and beverages (+17%), TCM (+16%), Supermarkets (+11%), Dairy products (+9%), Fashion and apparel (+8%), Eateries (+6%), Home appliances (+3%). On an average basis, we estimate that retail sales grew by 13% YoY in 1HCY12. More companies (8) reported YoY shrinkage of revenue in 1HCY12 versus the two previous periods, 2HCY11 (3) and 1HCY11 (2). Essentially, while more companies are facing revenue contractions, revenues are climbing overall. Companies should be able to support continued rental increases.
Maintain BUY
We maintain our BUY rating on CRCT and our fair value of S$1.70.
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