Agile Property to bounce back after Chairman Chen's charges dismissal

But will its profits be able to recover, too?

According to Maybank Kim Eng, one big overhang removed – positive newsflow for Agile. After-market yesterday, Agile announced that charges on Chairman’s alleged indecent assault were dismissed. 

Maybank adds, it was on August 30th of last year that Agile announced Chairman Chen was arrested by the HK Police in relation to an allegation of indecent assault. The charges’ dismissal is positive newsflow for the company. 

Here's more:

We see the next catalyst as whether Agile can cope with some operational bottlenecks and with tackling project slippages.

Implication: Previous potential management distraction related to the alleged charges now resolved. Investor concerns on potential management changes or transition should also be alleviated. Having said that, we do not rule out some potential changes which could lead to a better and more efficiently run company. 

In-line 2012 results expected. We forecast Agile to fetch CNY4.3b of underlying net profit for 2012, in-line with Bloomberg consensus’s CNY4.28b. Our 2012 revenue estimate is CNY26.6b, slightly below consensus’ CNY27.3b.

We expect GPM to come in at 42.6%, almost 1 ppt below consensus. We expect leverage to remain relatively high at 70.1% for end-2012. At least ~10% YoY growth in saleable resources GFA for 2013: Management previously guided at least around 10% YoY growth in saleable resources GFA for 2013 from 2012’s 6m sq m.

Most of the sizeable launches are slated for 2H13. Agile has 11% attributable GFA exposure to Tier 1 cities, 32% to Tier 2 cities and 57% to Tier 3 cities (we define Zhongshan and Lingshui as Tier 3). 

Action: We estimate the stock to be up 4-7% in the short-term but operational issues need to be tackled. The stock is trading at undemanding 54% discount to our NAV estimate of HKD20.4/share, 5.5x 2013 PE, and 0.9x 2013 PB.