UBS: Logan’s Urban Redevelopment Business Enjoys First-Mover Advantages Performance is Expected to Grow Over Business Cycles

(China/Hong Kong, 12 September, 2020) International investment bank UBS issued the latest research report, believes that Logan Group (3380.HK) has the first-mover advantage in urban redevelopment business, which is a new growth driver for the Company’s performance over business cycles and helps maintain its industry-leading profitability. UBS pointed out that land bank resources is the most critical element in the value chain of real estate development. The Company has RMB454.9 billion worth of salable resources in urban redevelopment, 94% of which are located in the Greater Bay Area. With abundant and quality land reserves, Logan is positioned to enjoy significant first-mover advantages. UBS also mentioned that the Company's urban redevelopment professional team has strong execution skills. Its urban redevelopment projects are of good geographic footprint, excellent quality, high market value, short incubation period, and stands a high chance of achieving profitability. This business is expected to contribute about 20% of core earnings per annum.

UBS highlighted that Logan has continued to create investment value. In the first half of the year, the Company achieved a core profit of RMB5.33 billion, an increase of 18.3% year-on-year. The core profit margin was 17.6%, up 0.3% year-on-year, leading the industry in profitability. As of June 30, 2020, Logan's total land bank value was RMB934 billion, of which the value of land bank in the Greater Bay Area increased to RMB762 billion, accounted for 82% of the total. The average land cost is only RMB4,610 / square meter, and the average land cost to selling price ratio is only 31.6%, which guarantees the Company to achieve performance growth continuously. UBS forecasted the Company will successfully complete its 2020’s attributable contracted sales target of RMB110 billion, with an 20% CAGR attributable contracted sales in the next three years.

UBS believes that in accordance with Logan’s development strategies, the Company's sustainable rental income will continue to increase. UBS is optimistic about Logan’s Long-term Business Partnership Program. It is believed that the program will help the Company to attract industry elites, consolidate its professional managers model that creates a shared value mechanism, and drives long-term growth in business performance and shareholder values.