China South City to invest HK$16b in e-commerce push with Tencent

Mall and logistics park operator to invest HK$16 billion in land and facilities to support partnership with mainland e-commerce giant

PUBLISHED : Thursday, 26 June, 2014, 1:07am
UPDATED : Thursday, 26 June, 2014, 1:07am

Mall and logistics park operator China South City plans to spend HK$16 billion in the coming financial year to buy land and develop more facilities to support a partnership with e-commerce giant Tencent. Income from services developed for e-commerce should triple over the next three years, it said.

The company will set aside HK$12 billion for capital expenditure and another HK$4 billion to HK$5 billion to buy land for the 2014-2015 financial year, said chief financial officer Stephen Fung.

China South City's capital expenditure plan is in line with its contract sales target for the year, which is set at the range of HK$18 billion to HK$20 billion, he said.

The company also aims to grow its recurring income to HK$1.5 billion to HK$2 billion in the next three years, from HK$655.7 million last year, through e-commerce channels and by tapping the growing market demand for warehousing.

China South City signed a cooperation memorandum with online major Tencent on Tuesday. The two agreed to cooperate in a range of areas, from e-commerce platform and network resources to the development of an integrated online to offline platform.

China South City will develop a Wi-fi intelligent digital solution service covering all its projects to disseminate promotional messages to users of Weixin, Tencent's mobile text and voice messaging communication system.

It also plans to launch a CSC-Weixin Mall, with the products sourced from China South City's outlet platform, allowing QR code payment and Weixin payment services. The deal with Tencent comes after the latter acquired a 9.9 per cent stake in China South City in January amid heated competition between Tencent and Alibaba.

According to Fung, China South City had been in touch with several parties before it reached the deal with Tencent.

"Alibaba is also very good, but we felt we have better chemistry with Tencent," said Fung, when asked why the company chose Tencent, rather than Alibaba.

Fung said he believed the e-commerce initiative would bring more business for the company but added it is difficult to quantify expected earnings at the moment as the partnership would take time to bear fruit.

E-commerce brought revenue to China South City for the first time in the second half of last year, mainly from the membership fee of one of the company's projects in Zhengzhou.

That HK$189 million e-commerce income constituted 1.4 per cent of the company's total revenue - or 29 per cent of recurring revenue - making it the biggest single source of income apart from property sales, and bigger than rental income, property management, logistics and warehousing.