China Vast Industrial Urban Development, a Chinese developer newly listed in Hong Kong, reported on Friday morning that its net profit dropped 17.7 per cent in the first half to 449.95 million yuan (HK$565.74 million) from the same period last year as taxes and cost of servicing loans jumped.
The developer, which made its debut in the Hong Kong bourse on Monday, however, reported total revenue rose 88.6 per cent to 1.35 billion yuan in the period.
The company blamed the drop in profit on a 219 per cent increase in finance costs to 64.94 million yuan as a result of an increase in interest rates on its trust loans and other loan facilities.
China Vast borrowed US$100 million in April at an interest rate of 15.76 per cent with an initial transaction cost of 13.1 million yuan. Another loan of 300 million yuan in June came at an interest rate at 24.61 per cent and an initial transaction cost of 37.9 million yuan.
The firm’s tax burden also shot up as its three subsidiaries – Langfang Sheng Shi Construction & Investment, Langfang Hangsheng Property Development and Langgang Yonglun Property Development – could no longer enjoy the previous tax benefits from January. As a result, its income tax expenses in the first half jumped seven times to 154.65 million yuan.
But China Vast, which develops large industrial towns around industrial parks in the country, saw revenue from property sales soar 260 times to 689.79 million yuan.
The company had raised a net HK$927.1 million in Hong Kong from its listing, with the retail tranche slightly undersubscribed. It had reallocated the unsubscribed shares in that portion to the international tranche, which was several times oversubscribed.