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Sino-Ocean Land's Net Profit for 2014 1H Soars 58% to RMB 2.2 Billion

[News]         Date of issue:2014-08-26

 

RMB million

For the six months ended

30 June

Change

2014

2013

Revenue

17,840

9,098

96%

Gross profit

3,518

2,187

61%

Profit attributable to owners of the Company

2,239

1,417

58%

Profit attributable to owners of the Company excluding one-off gain and loss

1,944

904

115%

Basic earnings per share

(RMB cents)

29.1

18.3

59%

Interim dividend per share

(HK cents)

7.5

7

7%

Dividend payout ratio

20%

23%

-3pts

Cash on hand (RMB billion)

16.8

(As at the end of June)

16

(As at the end of December 2013)

5%

Net gearing ratio (including Non-controlling interests)

60%

(As at the end of June)

44%

(As at the end of December 2013)

+16pts

(Hong Kong, 26 August 2014) Sino-Ocean Land Holdings Limited (“Sino-Ocean Land” or the “Company”, stock code: 3377), one of the largest property developers in Beijing and the Pan-Bohai Rim, today announced the interim results of the Company and its subsidiaries (collectively known as the "Group") for the six months ended 30 June 2014 (the "Period").

During the Period, the Group achieved outstanding performance; its revenue leaped 96 % year-on-year to RMB17.8 billion. Driven by improved operating efficiency, the Group’s gross profit soared 61% year-on-year to RMB3.5 billion, and profit attributable to owners of the Company increased 58 % to RMB 2.2 billion from that of the previous year. Basic earnings per share climbed 59% year-on-year to RMB29.1 cents. The Board of Directors recommended paying an interim dividend of 7.5HK cents per share with a scrip dividend option.

Focus on mainstream products produced remarkable result in de-stocking

uring the first half of 2014, all the indicators such as growth rates of investment in property development, land acquisition for housing, GFA of commodity housing sold and sales volume were on a downward trend, It was commonly acknowledged that the property market in China was in decline. 

Foreseeing the change in the market, Sino-Ocean has since the beginning of the year been promoting sales by ‘focusing on mainstream products, improving turnover and adjusting product mix’. While actively promoting sales, we were also agile in reacting to market needs and by adopting flexible and multiple measures to ensure our target was achieved. The Group’s contracted sales for the Period amounted to RMB13.24 billion accounting for about 33% of the year’s sales target and in line with management’s expectation.

Sino-Ocean was among the first developers to take special measures to shift stock, especially properties over a year old, including strategic co-operation with agencies and giving higher incentives to sales staff. The Group recorded contracted sales of more than RMB4 billion in June, nearly 100% increase MoM, indicating the positive effect of the Group’s sales strategy.

Rebound in core net profit margin  with good earning prospects

During the Period the Group adhered to set policy and made even more marked improvements in cost control, bringing its selling and marketing expenses, administrative expenses and finance costs down to 3.87% of revenue, 2.23 percentage points lower than the same period last year. Core net profit margin increased 1 percentage point to  11% despite the market’s downward trend, a true demonstration of the Company’s exemplary management efficiency.

As at 30 June 2014, the Group held cash of approximately RMB16.8 billion, laying a solid foundation for its future development. Locked-in contracted sales of approximately RMB 39.5 billion will be booked in the second half of the year and financial periods to follow, projecting high earning visibility.

Stronger support from major shareholders and closer co-operation in full swing

China Life and Nan Fung Group, being major shareholders of the Group further enhance cooperation with Sino-Ocean Land after injecting more capital into the Company last year. Both shareholders appointed one more director to the Board, the one from China Life is involved in the Group’s operation. They also rendered their full support in the Group’s credit rating and USD bond issue. China Life subscribed US$300 million of the 10-year bonds issued by the Company in July.

China Life will actively explore cooperation with the Group in real estate through debt or equity investment plan, and establishment of a joint venture or fund. China Life and the Group will also work together to explore investment opportunities, acquire land, develop projects, and acquire and jointly own commercial property projects. Nan Fung Group will seek opportunities for cooperation with the Group and advise on the Group’s development.

Achieved investment grade credit rating for the first time, improved debt structure

In July 2014 the Group was rated for the first time by three major international rating agencies – Fitch, Moody’s and Standard and Poor’s – at BBB-, Baa3 and BBB- respectively. Immediately following that the Group issued 5-year bonds and 10-year bonds for a total of US$1.2 billion at the end of July. Coupon rate was 4.625% and 6% respectively. The Group’s debt structure was optimized after the issuance.

Mr LI Ming, Chief Executive Officer of Sino-Ocean Land, said, “The Group’s corporate credit ratings and bond issuance not only indicated our robust financial position, excellent management capabilities and sustainable prospects, they also helped widen our financing resources, fine-tune our debt structure and lower overall finance costs.”

Investment properties – remarkable performance and growth potential

With a view to developing a balanced business portfolio in the medium and long term, the Group has been stepping up efforts to expand its investment properties in recent years. Its collaborations with major players produced satisfactory results.

Currently the Group has a mature portfolio composing three types of investment properties including high-end offices, large scale commercial complexes and self-owned brand properties for retail.  

In developing large scale commercial complexes Sino-Ocean Land chooses to go into joint-venture with highly experienced and solid partners such as Swire Properties. Following the launch of our first joint development project, Beijing INDIGO, we are going to launch Sino-Ocean Taikoo Li Chengdu (formerly known as Chengdu Dacisi Project), our second large commercial complex, in October 2014. Judging from the leasing status the project can be said to be offering the best prospects in that location in both the near and distant future.

In addition, the Company will take advantage of its ample experience in constructing and operating high-end offices to hold and manage more of these offices in tier one cities’ CBD and tier two cities’ core districts. At present rental income from Sino-Ocean Land high-end offices contributes nearly 75% of the revenue from investment properties. It is foreseen that by 2020, when both the Beijing CBD-Z6 and Z13 projects are in operation, even higher contribution will be generated by high-end offices for the Group.

Last but not least, the Group’s own shopping malls are developing steadily, attracting interest from an ever-increasing client base. Ocean We-life Plaza Beijing and Ocean We-life Plaza Tianjin, self-owned brand properties for retail, commenced operations last year. Another shopping mall, Ocean International Center, Phase II - Shopping mall opened in June this year and traffic continues to rise.

Judging from the current scale of investment properties held, the Group will complete and hold investment properties with a GFA of more than 3.5 million square meters by 2019. Over 90% of that is located in core areas of Beijing and thriving second-tier cities, enabling the Group to diversify its revenue sources and promising a sustainable development.

Replenishing land bank as foundation for development

As at 30 June 2014, the Group possessed land bank with a total area of approximately 22 million square meters at an average land cost of RMB 3,100 per square meter. It is sufficient for the Group's business requirements for the next 3-5 years.

The Group acquired 10 new projects in Beijing, Shanghai, Tianjin, Wuhan, and Zhongshan year-to-date and replenished the land bank with a GFA of approximately 2.9 million square meters. Five projects will be launched in the second half of the year, restocking the Group’s saleable resources.

Mr. Li said: “Looking ahead, the Group will further optimize its land bank structure in tier one and tier two cities, gradually increase quality land for investment properties so as to build up a balanced business portfolio in the medium and long term and to drive steady business growth.”

Improve execution capabilities, seek expansion actively 

Mr Li said: “As supply continues to rise, there will be more commodity housing waiting to be sold. Growth momentum in prices will continue to decline and market differentiation will be intensified. The Group will actively control expenses and try to reduce effective tax rate, adopt flexible sales strategy to encourage steady growth in sales. At the same time, we will seize opportunities to acquire land in the down cycle, participate in primary development of land, redevelopment of shanty towns and rejuvenation of old towns, while watching out for merger and acquisition opportunities.”
Mr. Li added: "With full support of major shareholder China Life, the Group will
leverage on its premium brand and execution prowess to optimize its location planning and promote a balanced development in all regions to maximize economies of scale. The Group will also put emphasis on risk management to ensure that all financial indicators are in line with set standards."

 

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