Structural realignment showed result Profit margin maintained stable
[News] Date of issue:2015-08-21
(Hong Kong, 21August 2015) Sino-Ocean Land Holdings Limited (“Sino-Ocean Land” or the “Company”, stock code: 3377), one of the leading property developers with presence in key economic regions in the PRC, is pleased to announce the interim results of the Company and its subsidiaries (collectively known as the "Group") for the six months ended 30 June 2015 (the "Period").
During the Period, the Group’s performance was stable, recording a revenue of RMB15.1billion, yielding gross profit of RMB 3.065 billion and profit attributable to owners of the Company of RMB 2.195 billion. Basic earnings per share was RMB 0.28. During the Period, the Group stayed committed to “prioritizing efficiency” by further reducing expenses on sales and marketing, administration and finance. This maintained the profit margin stable. The core net profit margin increased 2 ptsto 11.2% when compared to the end of 2014. The Board of Directors recommends an interim dividend of 7.5HK cents per share.
Remarkable result in de-stocking and steady growth in revenue
During the first half of 2015 the policy easing environment continued and the market, led by supply and demand, became more balanced. Capital supply was more relaxed and confidence was restored to a certain extent. Nevertheless, the pressure of de-stocking still loomed. The Group adopted determined measures to de-stock saleable resources that were around for a while by working with new channels. Our agile response to the situation effectively corrected the stock level.
During the Period, the Group continued to focus on de-stocking and successfully reduced the completed properties from RMB 17.2 billion to RMB 10.9 billion. This boosted the Group’s contracted sales for the Period by 4% YoY to RMB13.8billion although the average selling price remained the same. As stock was effectively shifted the Group plans to launch RMB 42 billion new resources in the second half of the year to ensure that the whole year’s sales target is met.
Land bank quality improved and location planning optimized
During the Period, Sino-Ocean Land refined its location planning with resolve by beefing up its land bank in first and second-tier cities. We held fast to our set criteria, focused on projects that promised quick asset turnover and intensified our efforts on M&A. We established our presence for the first time in Guangzhou, Nanjing and Hong Kong. Since the beginning of the year, the Group has acquired 9 projects, mainly located in first-tier cities and major second-tier cities, with a total GFA of 1.6 million sqm at an average cost of approximately RMB 6,900 per sqm. By value, nearly 100% of our land bank was located in first and second tier cities, optimizing our asset structure.
Most of the new land parcels were acquired at reserve price. Six projects including Ocean Inside in Tianjin, Ocean Chanson in Hangzhou, Ocean Premier Court and Ocean International Center in Nanjing can be launched later this year for rapid turnover. As at 30 June 2015 the Group owned a land bank with a total area of 20 million sqm, sufficient to meet the Group’s need in the next three to five years. The new projects are also expected to bring stable and substantial revenue to the Group.
Awarded on-shore AAA rating, finance cost reduced furthermore
In the beginning of 2015, the Group issued bonds totaling US$1.2 billion. Coupon rates for the 5-year bond and 12-year bond were 4.45% and 5.95% respectively. It was the first USD bond issue by a PRC developer in 2015and the rates were the lowest for USD bonds issued by an investment grade developer since July 2014.
Since receiving ratings from Fitch, Moody’s and Standard & Poor's in 2014, the Group was also awarded the highest rating “AAA” by domestic credit rating agency, China Cheng Xin Credit Rating Co. Ltd (“China Cheng Xin”) during the Period. The agency also viewed the Group’s property resources, location planning, shareholders’ capability and financial position favorably. During the Period, encouraged by the relatively relaxed on-shore financing sources and positive assessment by China Cheng Xin, Sino-Ocean Land issued its first onshore corporate bonds. In August 2015 the China Securities Regulatory Commission approved the Group’s initial issuance of 5 year, 7 year and 10 year with coupon rates of 3.78%, 4.15% and 5.00% respectively. The issue totaled RMB5 billion, the rates are record low and maturity one of the longest among PRC property developers’ corporate bonds. The bonds were over-subscribed with such zeal that there is undisputed recognition of the Company by both domestic and oversea investors.
Mr. Li Ming, Chief Executive Officer of Sino-Ocean Land, said, "The on-shore bond issue has broadened our financing channels, reduced the financing cost, optimized our debt structure and fortified our resistance to risk. The Group has always maintained a sturdy financial structure and will continue to follow strict investment principles to build an even more robust foundation for development."
During the Period the Group reduced its financing cost to 6.49% and kept interest-bearing debt under RMB 46 billion. Debt repayable within a year decreased to 12% and thus improved our debt structure. As at 30 June 2015, the Group’s cash resources was RMB 17.4billion, with approved but unutilized credit facilities of approximately RMB 68.7billion. The strong financial position provides a solid base for the Group’s future.
Investment properties posted material growth with visible earning prospect
For a more balanced development in the medium to long term, Sino-Ocean Land has been increasing its stakes in investment properties in recent years. Its collaborations with strong partners have produced satisfactory results. In the first half year, rental revenue from the Group’s investment properties marked a significant growth, increased by 39% YoY to RMB 700million. The Group will continue to look out for opportunities in central areas of first and major second-tier cities.
Since its opening in June 2015 Sino-Ocean Taikoo Li Chengdu, a joint-development with Swire Properties, has become a commercial landmark in Chengdu and the south-western region. Currently the retail space enjoys an occupancy rate of over 80% and attracts international brands including Gucci, Hermes, Apple etc as tenants.
Based on existing properties and projects in progress, the Company’s total revenue from investment properties is expected to exceed RMB3.5 billion by 2020.
Promoting senior living business, upgrading property management service
The Group always pays attention to customers’ needs and keeps upgrading quality of property management service. The “diversified business with four focuses” strategy will improve the Group’s competitiveness in the industry. After two years of research and hard work the Group is beginning to reap results from the senior living business. After the opening of the two projects in Beijing, namely “Senior Living L’Amore·Yizhuang” and “Senior Living L’Amore·Shuangqiao”, a third one is expected to open by the end of 2015. In addition to collaborating with China Life, the Group has also started a strategic co-operation with a US professional senior living company to bring our own business to a more professional level and standardized operation.
The Group is also committed to upgrading property management. During the Period, operating revenue reached RMB 460 million, a YoY increase of 20%. The Group’s own O2O Weixin platform “Yijiequ” has formed a strategic alliance with numerous O2O service platforms to provide a wide range of value-added services to property owners. Presently “Yijiequ” has exceeded 100,000 users.
Tighter co-operation with major shareholders, enjoyed strong support in all aspects
The Group enjoyed a closer working relationship with its two major shareholders, China Life and the Nan Fung Group during the Period. Smooth progress was made in our JV project, the CBD Plot Z13 in Beijing with China Life, and we are jointly developing LOHAS Park Package 6 in Tseung Kwan O, Hong Kong with Nan Fung. In addition to project development, the two shareholders also rendered their full support in both on-shore and off-shore credit ratings, as well as the Group’s bond issue. In July 2014 and January 2015, the Group issued bonds totaling US$ 2.4 billion, to which China Life subscribed over US$ 700 million. It has also taken up over 20% of the 10-year on-shore corporate bonds the Group issued in August 2015 totaling RMB5 billion.
At the same time the Group will continue to explore business opportunities in senior living with China Life and propose construction services for China Life’s self-use office buildings. We actively seek co-operation opportunities with a view to creating synergy for all.
Mr. Li Ming said, “We are pleased to have the continuous strong support from China Life and Nan Fung. It enhances our advantages and complements our capabilities in various areas. We will continue to examine co-operation opportunities in commercial properties and overseas investments, and boost synergy for mutual benefits.”
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