Guangzhou R&F Properties shifts focus beyond first-tier cities

Developer will put more money in secondary markets, where housing demand is tipped to increase

PUBLISHED : Friday, 17 August, 2012, 12:00am
UPDATED : Friday, 17 August, 2012, 10:33am

Guangzhou R&F Properties plans to increase investment in second- and third-tier mainland cities as the industry shifts its focus to the housing demand of end-users in the coming years.

Chairman Li Sze-lim said yesterday: "If we want to achieve a large property sales volume, we have to target end-users. The demand from end-users in second- and third-tier cities is stronger because of the urbanisation process. Property sales in first-tier cities, on the other hand, will remain slow."

The developer has expanded to 13 cities besides its major market, Guangzhou. In the first half of the year, R&F has been cautious about land acquisitions and bought just one site, in Hebei province. It expects to buy new sites in the second half.

"There are many investment opportunities in second- and third-tier cities," Li said. "We believe land prices won't rise significantly. We may actively acquire plots after the [central] leadership change, when there's policy stability.

"But we won't buy land aggressively unless they fit our requirements. We have a land bank of 28.31 million square metres."

R&F announced that its net profit for the first half plunged 35 per cent to 1.3 billion yuan (HK$1.58 billion), as its completed properties fell 36.6 per cent to 530,000 square metres during the period.

Delivery of completed properties in the six months represents about 22 per cent of the estimated full-year completion of 2.44 million square metres. Li said the company, however, delivered more than 1.78 million square metres by the end of last month, about 73 per cent of the full-year target.

R&F's turnover slumped 23 per cent to 8.44 billion yuan, while net profit margin dropped from 20.2 per cent to 12.7 per cent. Its net gearing ratio has improved to 84.7 per cent.

The developer generated 17.02 billion yuan from contract sales of 1.42 million square metres in the first seven months, achieving 53 per cent of the full-year sales target. It plans to launch five new projects in the next few months, four of them being commercial properties.

Li said he expected curbs in the property market to continue but believed the government would not impose a property tax as it would be difficult to implement on the mainland.

The company proposed to declare an interim dividend of 0.1 yuan per share.

Shares in R&F Properties fell 3.37 per cent to close at HK$9.19 yesterday.