Strong home sales boost Shimao profit to 1.3b yuan
Shimao Property Holdings, controlled by the mainland's second-richest man, Hui Wing-mau, said core profit tripled in the first half of the year, driven by strong home sales in the surging domestic property market.
Underlying profit rose to 1.32 billion yuan in the first six months from 431 million yuan in the previous year. Including a property revaluation gain of 764 million yuan, net profit more than doubled to 2.08 billion yuan from 703 million yuan.
Revenue from home sales rose 11 per cent to 2.4 billion yuan after it booked 220,219 square metres of residential saleable space, up 89 per cent.
It also booked 752 million yuan profit from the sale of 29.99 per cent of Wuhan Shimao Splendid River residential project to Morgan Stanley Real Estate.
'The strong revenue growth from property sales will [continue] next year as the large-scale residential project in Shenyang is scheduled for completion,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities.
Shimao achieved 60 per cent of its sales target this year after reaping 900 million yuan from property sales this month, executive director Jason Hui Sai-tan said.
'Our sales target is 8.9 billion yuan this year,' he said. 'We have seven pre-sale projects that will be completed in the second half.'
Mr Hui expects contracted sales to total 40 billion yuan in 2010 and completed gross floor area to reach six million square metres.
To meet that long-term target, Shimao bought six development sites this year with a total planned gross floor area of 4.26 million square metres at an average land price of 1,000 yuan per square metre. It plans to add a gross floor area of four to six million square metres in the second half, Mr Hui said.
The acquisitions boosted its land bank to 20.63 million square metres in 18 cities, which would be sufficient for development over the next five to six years, the firm said.
'We are looking for development sites in cities with high economic growth such as Dalian, Qingdao and Tianjin,' said chairman Hui. 'Land prices in Shanghai are close to property prices. We aren't interested in the site to be auctioned this month.'
Shimao aims to cap land acquisition costs at below 30 per cent of current property prices in the city. The developer expanded in Shanghai recently by injecting a dozen commercial properties into Shanghai Shimao in June.
Helped by the opening of Le Royal Meridien Shanghai in the second of half last year, revenue from hotel operation rose 5.7 times to 217 million yuan. The company's three completed hotels, including the Shanghai Le Meridien Sheshan and the Hyatt on the Bund, had a combined appraised value of 11.95 billion yuan at the end of June.
Mr Hui Wing-mau said the company would consider spinning off the hotel properties into a real estate investment trust if market sentiment on property trusts improved.
Shares of Shimao dropped 6.532 per cent to close at HK$16.60 yesterday. The company declared an interim dividend of 15 HK cents.