Shimao slashes sales goal 20pc amid slowdown

PUBLISHED : Friday, 26 September, 2008, 12:00am
UPDATED : Friday, 26 September, 2008, 12:00am

Mainland developer Shimao Property Holdings has cut its sales target by 20 per cent to 14 billion yuan (HK$15.96 billion) for this year and is selling new homes at lower prices as demand retreats.

Vice-chairman Jason Hui Sai-tan said the firm had also slashed its sales target by about 30 per cent for next year and 2010 to 20.8 billion yuan and 26.5 billion yuan, respectively.

He was confident the company could meet the new targets as it had signed sales contracts for 8 billion yuan worth of homes so far.

Shimao would release nine projects next month, traditionally a peak home-buying season, Mr Hui said.

However, average selling prices in the second half of the year might be lower than the 12,627 yuan per square metre in the first half, he added.

The company had offered about 10 to 20 per cent discount on new homes than the original asking prices, but it could still maintain its gross profit margin thanks to the low land cost, Mr Hui said.

Gross profit margin in the first half this year was 58.7 per cent, up from 41.7 per cent a year ago.

New homes at its project in Shenyang have been released at 10,000 yuan per square metre, down from 12,000 yuan in the previous release, while prices of remaining units at its projects in Beijing and Nanjing have been cut by about 20 per cent.

Total investment cost of the Shenyang project was only 5,000 yuan per square metre, including 1,000 yuan per square metre in land cost, Mr Hui said. 'We'll still enjoy a handsome profit margin even if we sell the units at 10,000 yuan per square metre.'

Shimao yesterday announced underlying interim profit fell 35 per cent to 416 million yuan. Including the revaluation gain on investment properties in both years, net profit slumped 55.9 per cent as turnover dropped 24 per cent to 1.84 billion yuan.

Chairman Hui Wing-mai expected the firm's cash in hand would increase to 5.3 billion yuan by the end of the year. It also had available banking facilities of 3.5 billion yuan.

Given its strong cash position, Shimao was studying the possibility of share buy-backs, Mr Hui said. 'The mainland property market will turn better next year and we'll see a pick-up in prices in March.'

Shares of Shimao fell to a 52-week low of HK$3.77 at one point yesterday before closing at HK$3.95, down 1.25 per cent. The stock has fallen 55.32 per cent this month.


The mainland property developer is considering buying back its shares

By the end of the year, Shimao Property is expected to have cash of, in yuan: 5.3b yuan