KWG's revenue fell 4% to CNY9.68b

Here's the main culprit.

According to Maybank Kim Eng, KWG reported lower than expected revenue at CNY9.68b for 2012, down 4% YoY and lower than Bloomberg consensus of CNY11.18b  by 13.5% and 8.4% below its estimate of CNY10.56b. 

Here's more:

KWG ended up delivering less GFA than expected, with a YoY drop of 13%in property development booked to 796k sq m 2012 vs 2011’s 918k sq m. The delivery GFA was lower than management’s earlier guidance.

Recognized ASP for 2012 rose by 9.5% to CNY11,716/sq m. Estimated underlying net profit for 2012 came in at CNY1.904b (up only 4% YoY), below Bloomberg consensus of CNY2.085b by 8.7% but in-line with our estimate of CNY1.93b.

Full year DPS came to CNY0.15/share, lower than our and consensus estimate of CNY0.20/share and lower than 2011’s CNY0.22/share. GPM was weaker than expected at 36.5% for 2012, vs 2011’s 44.2% and our estimate of 40.2%.

Construction costs per sq m rose more than expected from 2011’s CNY3,870/sq m to CNY4,660/sq m in 2012. Originally, we did not worry about cost control for KWG due to its relatively high profit margins, but we believe the company should put more efforts on cost controls after we see this set of results.

Total SG&A came to 9.2% of topline for 2012, a tad higher than expectation. Estimated underlying net profit margin was relatively high at ~19.7%, vs. 2011’s 18.1% due to high contribution from JCE projects in 2012 (such as GZ Riviera). Net gearing was healthy at 64% as of end-Dec.