GS：China：Real Estate Developers－

The day after LAT: faster consolidation, more opportunities

February 12, 2007 15页 英文

Industry context
We have raised our 12-month price targets for the Chinese developers by
1-47% (except BCL, -4%) by incorporating the estimated potential new land
acquisitions in 2007. The upward revision of price targets of China Vanke
(A)/(B), R&F, Shimao, COLI and Greentown were more significant after
factoring-in their aggressive land acquisitions in the latest months (R&F) or
our expectation of faster land expansion in 2007 (Vanke, Shimao,
Greentown and COLI). We believe the stringent enforcement of Land
Appreciation Tax (LAT) will speed up the industry consolidation and create
more acquisition opportunities for the listed developers, though the LAT
issue will inevitably bring an immediate hit to our NAV estimates for the
existing land bank. The latest notice (dated January 17, 2007) from The
State Administration of Taxation further elaborated on the rules and
methods of LAT settlement. We argue the aforesaid impact is just a onetime
hit and we believe the market has not looked into the potential
positive implications of the LAT issue yet. In particular, we believe higher
LAT burden would likely trigger more land disposals at distressed prices
by weaker developers and create more acquisition opportunities for the
listed players to expand their development margin in the medium term.