Shimao Property seals mortgage loan deal with banks

PUBLISHED : Wednesday, 26 March, 2014, 6:34am
UPDATED : Wednesday, 26 March, 2014, 6:34am

Shimao Property says it has signed strategic agreements with the mainland's four biggest banks to provide up to 30 billion yuan (HK$37.5 billion) in mortgage loans to its customers in a bid to meet a 20 per cent increase in sales this year.

The developer said yesterday underlying profit, excluding revaluation gains on investment properties, rose 66.8 per cent last year to 7.31 billion yuan.

It reported 45 per cent growth in revenue to 41.5 billion yuan, in line with a consensus estimate of 41.4 billion yuan from 25 analysts polled by Bloomberg.

The company will pay a final dividend of 81 HK cents per share, up 47.3 per cent from the previous 55 HK cents.

"We expect Beijing will regulate the property market in those cities with fast growth in home prices through tightening lending for developers and mortgage loans," company vice-chairman Jason Hui Sai-tan said. "With such a financial arrangement with banks, it will help to speed up our sales as our customers will manage to secure housing loans more easily."

The firm has raised its annual sales target to 80 billion yuan this year, 20 per cent higher than last year's 67 billion yuan.

Hui said the firm had signed strategic agreements with Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China to offer home loans to its customers.

Under the mainland's mortgage policy, first-time buyers are required to come up with a 30 per cent down payment, but that can rise to as much as 70 per cent for second-time buyers.

But Hui said Shimao would not follow some developers in providing second mortgage loans to buyers.

Some developers in Guangzhou have reportedly been offering 20 per cent loans on top of banks' 70 per cent ceiling for first-time buyers, meaning buyers are only required to meet down payments of 10 per cent of the property's price.

After spending 29 billion yuan to acquire 9.36 million square metres of land last year, Hui said the focus this year would be on selling properties to shore up cash flow to finance construction costs and land premiums and reduce debt.

He said Shimao would build more "mini" shopping centres and hotels instead of large projects as a way to speed up turnover of assets and free up capital for future expansion.

Shimao was unlikely to be affected by further tightening of liquidity as it had cash on hand 19.6 billion yuan and unused banking facilities of 20 billion yuan, he said.

Taking a 1.03 billion yuan revaluation gain on investment properties into account, net profit rose 28.2 per cent to 7.39 billion yuan.

Shimao announced its annual results after its shares fell 4.34 per cent to close at HK$14.56 yesterday. The Hang Seng Index dropped 0.52 per cent.