Earnings at Beijing Capital Land jump 18pc
Beijing Capital Land dismisses the need to cut prices to meet a 28b yuan target despite slow sales in first half amid a recovery in the market
Hong Kong-listed developer Beijing Capital Land said yesterday that it could hit a full-year sales target of 28 billion yuan (HK$35 billion) without cutting prices despite slow sales in the first half, but gross profit margin would suffer.
The company reported an 18 per cent year-on-year jump in first-half net profit attributable to shareholders to 661.13 million yuan. But gross margin fell 3 percentage points from six months earlier to 23 per cent at the end of June. Revenue dropped 8 per cent to 4.52 billion yuan.
Shares in Beijing Capital Land gained 1.04 per cent to HK$2.91 yesterday, recovering from an early dip to finish near the highs of the session.
"China is easing its [housing] policy, with more cities expected to scrap home purchase restrictions and [mortgage] loans becoming cheaper," said chairman Liu Xiaoguang.
Executives told reporters that there was no need to cut prices for the rest of this year to boost sales as the market was recovering, although the company only achieved contracted sales of 6.77 billion yuan in the first six months. It has 35 billion yuan worth of homes available for sale in the second half, while the gap to hit target is less than 22 billion yuan.
Chief executive Tang Jun said 60 per cent of the pipeline was in Beijing and Tianjin and 75 per cent was for end-users.
The average selling price rose 1.6 per cent in the first half. Beijing and Tianjin combined generated 56 per cent of its contracted sales during the period.
The developer said in its interim report on Monday that it would encourage use of a performance-based assessment scheme and innovative e-marketing strategies to boost sales in the second half.
"Most of the property developers in the second half of 2014 will face pressure from oversupply, which is expected to last until the end of 2014," it said in a filing with the stock exchange.
In the first seven months of this year, Beijing Capital Land bought nine parcels in five core cities - Beijing, Shanghai, Tianjin, Chongqing and Chengdu in Sichuan province - and teamed up with a local developer to build a residential project in Sydney, its first overseas project.
The company will continue to snap up land parcels in the rest of this year as it considers the timing is good due to a downturn on the mainland. It would also seek opportunities in foreign countries such as Britain and the United States although it would like to find a local partner first, said Bryan Feng, head of capital management and investor relations chief.
The land acquisitions and slow sales pushed Beijing Capital Land's net gearing ratio up to 77 per cent at the end of June from 59 per cent at the end of last year. Short-term borrowings more than tripled to 4.3 billion yuan during the period, while bonds outstanding soared 163 per cent to 5.2 billion yuan.
The firm had 11.7 billion yuan of cash at the bank and on hand at the end of June. It said it would leverage its domestic and overseas financing platforms to obtain both equity and debt financing but gave no details.
Interim earnings per share gained 18 per cent from a year earlier to 33 fen.