China Overseas Land & Investment

Developer mulls asset spin-off for realty focus

PUBLISHED : Friday, 31 March, 2006, 12:00am
UPDATED : Friday, 31 March, 2006, 12:00am

Property sales in Hong Kong and Macau see sharp increase as land bank grows

China Overseas Land & Investment, one of the biggest developers on the mainland, is considering a spin-off of its infrastructure assets in a restructuring that will free it to concentrate on real estate.

Vice-chairman and chief executive Kong Qingping said yesterday the plan to list infrastructure assets separately would allow the group to extract value from the business and sharpen its property focus.

'Infrastructure investment provides a steady income and cash flow. Last year, turnover reached about $500 million, while profits were about $120 million,' said Mr Kong. The group's infrastructure assets include power plants, toll roads, and bridges.

'We will also acquire some infrastructure assets from its parent [China Overseas Holdings] in the proposed listing vehicle,' he said.

The listing venue and timetable, however, had yet to be finalised.

The restructuring proposal was unveiled during the presentation of the group's annual result for last year, which showed that net profit attributable to shareholders increased by 42.95 per cent to $1.53 billion, thanks mainly to strong earnings from China and higher contributions from property sales in Hong Kong and Macau.

Total property sales in Hong Kong and Macau amounted to $1.96 billion, more than nine times higher than sales achieved in 2004.

On the mainland, property sales revenues amounted to $7.5 billion, up 45 per cent from the preceding year. In terms of gross floor area, the company sold 1.13 million square metres, representing an increase of 31 per cent from 2004.

Mr Kong said the expansion in the China property market would continue this year, and the group planned to increase its land bank by more than three million square metres.

At the end of last year, omitting its equity interest in syndicated projects, it had a land bank of 10.75 million square metres.

The land was either under development or due to be developed in the near future, said Mr Kong.

'The existing land reserve of the group is sufficient to support its development in the coming three to four years and is expanding at the target rate of over 20 per cent per year,' he said.

By the end of this year, the group expects that 22 projects will be ready for occupation.

During the year, there was a provision write-back of $50 million for Hong Kong properties.

A final dividend of four cents was declared, bringing the full-year dividend to seven cents. Earnings per share increased by 40.4 per cent to 24 cents.

Sister company China State Construction International, meanwhile, posted a net profit attributable to shareholders of $130.66 million, down from $137.24 million previously.

Basic earnings per share were down 25.6 per cent to 32.26 cents and the company proposed a final dividend of nine cents a share.

China Overseas LandAnnual$mNet profit1,534Revenue6,971EPS (?)24