Agile sells assets to reduce debt

PUBLISHED : Saturday, 19 April, 2008, 12:00am
UPDATED : Saturday, 19 April, 2008, 12:00am

Agile Property Holdings is in talks to sell a minority stake in two residential projects as it moves to improve its cash flow and reduce debt.

The Guangdong developer said it had no plans to buy more land this year, adding that its 28.43 million square metres of land bank comprising 51 projects was sufficient for development over the next eight years.

Analysts said Agile's move was a 'sensible' way for a developer to manage its finances as Beijing continued efforts to tighten lending and cool growth in the property sector.

The developer disclosed the plan as it announced a 69.3 per cent jump in net profit to 2.1 billion yuan (HK$2.34 billion) for the past financial year to December on the back of strong property sales and rising home prices.

Earnings per share rose 58 per cent to 56.1 fen, compared with the preceding year. Gross margin expanded 7.7 percentage points to 50.5 per cent.

Chairman Chen Zhuolin said the company was selling between 25 per cent and 30 per cent of two residential projects to strategic investors.

The deals, if they materialise, would improve cash flow and reduce the company's net gearing from 60.5 per cent to 50 per cent, Mr Chen said.

Cash and cash equivalents of the company amounted to 2.58 billion yuan last year, Agile said in its results statement.

Analysts estimate its stakes in the two projects to be worth 3.7 billion yuan.

This would help fund the company's planned expenditure of 12.2 billion yuan this year.

Other sources of income would be the sale of 15 billion yuan of projects in Guangdong and other mainland cities such as Nanjing and Chengdu, Mr Chen said.

In the first quarter of this year, the company recorded property sales of about 3 billion yuan.

Commenting on the market's outlook, Mr Chen said: '2008 would be a challenging year but the company is well prepared.'

The average selling price of Agile's properties was about 7,200 yuan per square metre, with a unit land cost of 547 yuan per square metre last year.

Even if Agile was forced to lower prices by 10 per cent in a market slowdown, the company would still manage to record stable profits, Mr Chen said.

CCB International Securities analyst Raymond Cheng Wai-mo said it was good to see that Agile was well prepared for a difficult operating environment.

Mr Cheng said the company should maintain a comfortable financial position amid tighter credit conditions for mainland developers.