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28/08/2015 16:02

Exclusive: SHIMAO Hedging Bets On H1 Showing

AMID A TOPSY TURVY PRC economy, and an even more volatile domestic property sector, all bets are off on how to assess results or provide guidance on financial performance, an executive with leading real estate play Shimao Property Holdings Ltd (00813) told Asia Fund Space.

The Hong Kong listco's January-June revenue rose a robust 23.3% year-on-year to 29.19 billion yuan, among which revenue from hotels, rentals and other income jumped 36.6% to 1.46 billion.

Interim gross profit increased 11.0% year-on-year to 8.962 billion yuan, while the half-year gross profit margin decreased to 30.7% from 32.5% a year prior.

However, first half net profit fell 14.9% to 3.56 billion yuan.

Excluding the net impact of major after-tax non-cash items, net profit from core business attributable to shareholders stood at 3.49 billion yuan and the net profit margin from core business attributable to shareholders was 15.2%.

Basic half-year earnings per share stood at 102.84 RMB cents.

"It's difficult to say whether this first-half performance is 'good' or "bad' as it's quite hard to judge in this current operational environment," Shimao Senior Manager of Investment Mr. Nick Ng told Asia Fund Space on the sidelines of the diversified property play's interim earnings briefing in Hong Kong.

However, there was reason for optimism, given the relatively strong top-line performance that Shimao put up in the first six months.

"All things considered, we are quite pleased with our revenue growth this half, especially considering our peers," Mr. Ng told Asia Fund Space, pointing to the neighboring conference room in which real estate rival Agile Property (HK: 3383) had just told investors its interim top line was flat year-on-year, with a much sharper net profit plummet.

January-June contracted sales amounted to 31.55 billion yuan comprising an area of 2.627 million sq m. 

As at 30 June 2015, the Hong Kong listco's attributable land bank was approximately 33.31 million sq m, with funds at its disposal standing at 44.34 billion yuan, including cash of approximately 27.34 billion and the balance of available banking facilities of approximately 17.00 billion, with the net gearing ratio shrinking to 57.5% (as at end 2014: 58.6%).

The board declared the payment of an interim dividend of 30 HK cents per share (2014 interim: 30 HK cents per share).

"After a downturn period, a number of policies favorable to the real estate market were introduced by the government in the first half of 2015, and according to statistics from multiple perspectives the market has stabilized and has begun to resume vibrancy.

"Developers prudently managed supply to maintain steady growth in sales and in the first half of 2015, total investment in property development in China was approximately 4.40 trillion yuan, representing a year-on-year increase of 4.6%, with a steady growth of the market achieved in the transition," said Shimao Chairman Mr. Hui Wing Mau.

He added that the effectiveness of control on supply was "significant."

"The transaction volume of commodity housing in Beijing, Shanghai, Guangzhou and Shenzhen experienced a sharp increase in the first half of 2015 as compared to the corresponding period of last year, and in particular, demand in Shenzhen was strong which led to a significant growth in transaction volume by over 30%.

"We will increase our supply to tier-one and tier-one-ready cities to 54% of a total value of more than 20.0 billion yuan in the second half of the year, and we are confident that with continuous efforts to meet the market demand, our performance will be better in the second half of 2015."

The property enterprise's strong first half top line was ahead of Credit Suisse's expectations, with the research house cutting its target price to 14.4 hkd from 18.4 while staying "Outperform."

Meanwhile, Deutsche stayed "Sell" with the target cut to 8.19 hkd from 8.34.

"While its completed but unsold inventory remained high despite more proactive efforts to clear inventory and delayed construction works during the period, we are lowering our target price," the brokerage said.

Shimao Property Holdings Ltd invests in and develops real estate properties in the PRC. The company develops residential, commercial, and office properties, as well as hotels; and operates hotels and shopping malls. It is also involved in the trading construction materials; provision of marketing services; and provision of architect, design, management, and consultancy services. The company was incorporated in 2004 and is headquartered in Shanghai. 

(Note: This story is contributed by Andrew Vanburen. Mr. Vanburen has served as a
government official focused on international trade at the American Institute of Taiwan in
Taipei, and worked in financial journalism for nearly a decade in both Beijing and
Shenzhen. He holds a Master's Degree from New York University. He is currently Director at
Hong Kong-based Asia Fund Space. For more information, please visit:
www.asiafundspace.com)

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